Villa World draws battle lines ahead of takeover bid

Villa World draws battle lines ahead of takeover bid

The battle for control of residential developer Villa World (ASX: VLW) has been ramped up with the company reportedly hiring Macquarie Capital as its defence adviser.

The Gold Coast-based Villa World confirmed it has received a $280 million takeover bid from AVID Property Group and this has prompted its biggest investor, Singapore listed Ho Bee Land, to up its stake in the company by two percent to 9.41 percent.

AVID Property Group, which was spun off the Investa empire, already has a $3 billion development pipeline and is looking to expand its operations through the acquisition of the residential-focussed Villa World.

In its indicative proposal, AVID states that Villa World's exposure to greenfield growth corridors on Australia's east coast fits well with its strategic ambitions to expand its existing platform and that it views the two platforms as being highly complementary.

Villa World confirmed it had received the unsolicited takeover offer from Avid which is effectively $2.23 a share. It also confirmed AVID has requested access to company information to conduct due diligence.

AVID has stated that it expects to be able to fund the acquisition of 100 percent of Villa World from internal resources, equity contributions from AVID's shareholders and debt facilities.

Villa World is now in the process of assessing the indicative proposal, which it notes is a conditional, incomplete and non-binding expression of interest.

"There is no guarantee that following the board's consideration of the indicative proposal that AVID will be granted diligence or that the indicative proposal will result in a transaction or that the board will recommend any proposal," Villa World's CEO and MD Craig Treasure says in an ASX statement.

Despite a downturn in the residential property market in Australia, Villa World continues to perform well and last month it recorded a slightly improved profit at the end of the first half of FY19.

The residential house and land developer announced a $17.6 million after tax half year profit, up from $17.3 million at the end of H1 FY18.

This was despite sales being down significantly from the same time last year. The company recorded 517 sales compared to 1H18's 742.

The company decided to not provide guidance for FY19 in light of market conditions and upcoming elections federally and in NSW which could lead to increased customer uncertainty.

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