Allco draws Rubicon into the fold

Allco Finance Group continues to draw satellite companies into the consolidated group, crystallising financial rewards for some key stakeholders.

The latest is a proposal to buy the 80 per cent of Rubicon Group that it does not already own. The cash and scrip offer, worth $276.6 million at Allco's current share price of $8.91, will increase the size of Allco's real estate assets from $3.9 billion to $9.1 billion.

The cash component of the deal is $62.7 million. A further $52 million of Allco shares will be issued in 2011, conditional on agreed performance goals being achieved.

The purchase price values Rubicon at 11.7 times 2007 earnings. Rubicon reported net profit of $12.9 million for 2006/07, up from $5.6 million the previous year.

Allco has removed non-recurring fee revenues, one-off expenses and amortisation of debt facility costs to produce a normalised earnings figure of $35.3 million for Rubicon in 2007.
 
Allco shareholders will meet on December 12 to vote on the deal.

Allco executive chairman David Coe owns 19.9 per cent of Rubicon. Other major shareholders are Rubicon directors Gordon Fell, with 44.9 per cent, and Matthew Cooper, with 14.8 per cent.

Rubicon manages a series of listed property trusts, including Rubicon America Trust, Rubicon Europe Trust and Rubicon Japan Trust.

Allco chief executive David Clarke said at an investor presentation yesterday that the combined group would be one of the biggest real estate investors in Australia, with global reach and great depth of expertise.

The combined group will have 32 per cent of its assets in America, 25 per cent in Europe, 21 per cent in Australia, 17 per cent in Japan and five per cent in Singapore.

Clarke said integration risk was low because Allco has held 20 per cent of Rubicon for the past three years.

Fell and Cooper have agreed to enter into three year employment agreements with Allco. Fell - currently a non-executive director of Allco - will become executive chairman of the firm's real estate division.