Brookfield Property Partners L.P. BPY

Tender is part of the takeover process

[mariorizzi]

Shares trade at about $11. NAV is about $29. (The NAV is debatable, but clearly there is a lot of equity in the company and the base NAV is considerably higher than the share price.)

Question: The tender is for $12. While this is a deal, you should ask yourself, why would BAM do a tender, if they could just buy units on the open market for less.

Answer: The tender is not really relevant. BAM's goal is to take over the company because at anywhere near these prices, it's the deal of a lifetime. But they cannot announce a takeover at $12 because it would be completely unfair to unitholders. So, they do a tender and grab a few shares on the cheap from unitholders who desire "liquidity." This is good for BAM because it lets them get some units on the cheap, and when they finally announce the real takeover, it will cost them less to take over the whole company.

But, more than that, it sets an intrinsic price that sharehooder will accept. This is a very important concept. If in 6 months, BAM announces a takeover bid for $13 or for $14, it becomes very hard for unitholders to complain, because BAM will just say, "look, we did a tender at $12 a few months ago and 10% of unitholders were happy to get that price. Nobody forced them to tender, but they all did it. In fact, it was oversubscribed. So clearly, it was a totally fair price. And now we are offering a few bucks more, because we are very generous, you should be happy."

And just like that, BAM will get to take over BPY for less than 50% of book value.

[BlueJay2020]

I think there is definitely a game being played here.  It reminds me, to some extent, of the whole HBC saga - the share price lagging the NAV, and a desire to take the company private.  However, I would have more faith in Brookfield Management than Baker's who seemed to be able to produce valuations of assets that matched whatever argument he was trying to make at the time. 

[thenewsnake]

If REIT sector snaps back fast BAM likely wouldnt take it over.  If REIT sector continues to be weak over the next 12 months, they could do 1 or 2 more tenders, then take it private.  I think REITS are poised to rally soon as the lockdown fever is ending.   Cases/deaths spiking would likely only trigger a "7 days" to slow the spread, not a 3 month BS affair

[Lacas24]

I agree 100% of your reasoning. Spot on. That's why I am hoarding prefered shares non stop. Either they pay me off at par or I am taking double digit rate until the end of time. Lol

[shawshank2]

Just check reset dates

[Lacas24]

Thanks. I only have 2024 reset T series. BPYUP and no reset x and y series.

[NPCexe]

Just gonna hold on common shares only.. I hope it works out for all types of shares.

[rad10]

BAM known for playing hardball with its offspring.  Wouldn't at all be surprised to see this go down as you describe.