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Argosy mulls DNZ merger proposal

Tuesday 17th May 2011

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Argosy Property Management independent directors are evaluating the potential of a merger, following an indicative and non-binding letter from DNZ Property Fund.

The development comes a week after the Argosy independent directors Trevor Scott and Peter Brook said an "uncompelling" oral approach had been made on behalf of DNZ, which had been asked for written details.

Today they said they had now received a letter broadly outlining how a merger between Argosy and DNZ could be achieved.

"We note that at this point the letter is indicative and non-binding, but envisages DNZ as the acquiring entity," the Argosy independent directors said.

They wanted to carefully evaluate the potential of any merger and, in particular, how the properties owned by DNZ could be integrated into a combined portfolio, along with tax, gearing, distribution and other relevant matters.

But their central focus remained on a proposal to internalise the Argosy management contract in the most efficient and timely manner.

Last month the Argosy Trust announced plans to internalise rights to manage the trust currently held by Argosy Property Management Ltd, which is owned by ANZ subsidiary OnePath. The move involves a payment of $32.5 million to Argosy Property Management.

Last week DNZ Property said there were concerns about that plan. The DNZ proposal could result in a reduction in the payment to internalise or terminate the management arrangements, while DNZ could provide benefits to a combined entity.

At that time DNZ said that under its proposal Argosy unitholders would receive shares in DNZ Property at an agreed exchange ratio based on the relative value of each entity at the time of the transaction. DNZ Property would become the ongoing listed entity managing the combined portfolio internally.

In the Argosy announcement today, the independent directors said they considered that internalising the management contract was likely to create the greatest value and strongest position for Argosy unitholders from which to consider all proposals, including that outlined by DNZ.

They had reason to believe that OnePath did receive competing, and potentially higher value indications of interest for the management contract but chose to work with them on a proposal that was likely to achieve the most favourable outcome for unitholders, the independent directors said.

An independent report on the merits of the internalisation proposal was being prepared, and would be sent to unitholders along with further details and a notice of meeting in due course.



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