McGrath Limited (ASX: MEA) has sold a 15 per cent stake in the company to property giants Aqualand Group that gives the company a $10.7 million injection of fresh cash.
Aqualand has already acquired an 8.7 per cent stake in McGrath and will take a further 6.3 per cent stake if the deal is approved by McGrath shareholders.
The ASX listed McGrath recently halved its full year earnings guidance, meaning the Aqualand cash boost will likely be welcomed by shareholders.
As part of the deal Aqualand will be entitled to a director on the board of McGrath and give McGrath the first right to discuss being an agent to its new projects. Aqualand retains discretion as to whether or not to appoint McGrath.
The agreement has an initial term of five years and can be renewed for two further terms of three years each by agreement between the parties.
John McGrath (pictured), the founder of McGrath and executive director, says the Aqualand deal is a significant vote of confidence from the Sydney based property developer.
"The addition of a new strategic shareholder in Aqualand represents a great vote of confidence in the future of McGrath Limited," says McGrath.
"Aqualand is one of Australia's highest quality property development and investment groups and its addition as a major shareholder and board representation provides McGrath the opportunity to continue to grow our Project Marketing expertise and develop even stronger ties with the inbound investment."
Geoff Lucas, McGrath CEO, says the deal comes at a pivotal time for the company.
"The Australian real estate market is becoming more sophisticated and relationships and channels are more important than ever before," says Lucas.
"Working closely with a major shareholder like Aqualand, which owns some of the best residential development sites in the country, represents a great opportunity to grow our business in project marketing."
Acqualand was established in Australia in 2014 and has since generated a portfolio of 18 sites, with a collective gross development value of approximately $5 billion.
The $10.7 million in proceeds will be used for general corporate purposes, including business development and potential growth opportunities.
Aqualand has advised that CEO of AL Capital, Wayne Mo, is their nominee to the board of directors of McGrath.
Shares in McGrath closed on Tuesday at $0.34 per share.
Business News Australia
Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support