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Abstract
Mergers and acquisitions within the Australian‐real estate investment trusts (A‐REITs) sector have become a noticeable trend in the last decade. Utilising event study methodology, 36 successful A‐REIT mergers and acquisitions between January 1995 and December 2008 were examined. Both target and bidding shareholders experience positive excess returns of 4.27% and 0.54% respectively over the 41 day event window [−20, +20]. Analysis indicates that the cumulative abnormal returns (CARs) for bidding firms are considerably greater than previous research suggests. This study finds higher bidder CARs when scrip or a combination of scrip and cash is used to finance the acquisition. We also find that the relative size or the size of the acquirer have a positive and significant impact on the excess returns of bidding A‐REITs. This suggests that the synergistic benefits from the acquisition are a result of economies of scale and increased market power. There is also some evidence that the relative size and method of payment influence the CARs of target firms during the event window.
Notes
1. Source: Authors computation from S&P/ASX200 A‐REIT index as proportion of S&P/ASX200 index as at November, 2009.
2. For extensive discussion on the impact of the global financial crisis and A‐REITs see Doble (Citation2009).
3. Australia is the most highly securitised property market in the world, with nearly 60% of the underlying properties securitised (Bartholomeusz, Citation2005).
4. Compared with US (37%), UK (8%), Hong Kong (12%) and Japan (13%) benchmark allocations by property security funds (Newell, Citation2008b).
5. See: Jensen and Ruback (Citation1983) and Servaes (Citation1991).
6. Sahin (Citation2005) also investigated cumulative average and mean calendar AR along with the Fama–French three factor model, however, neither model detected significant AR.
7. Countries included: USA, Canada, UK, Australia, Sweden and the Netherlands.
8. S&P/ASX200 is the investable benchmark for the Australian equity market. The index is comprised of the top 200 stocks listed on the Australian Stock Exchange.
9. See Scholes and Williams (Citation1977) for full discussion on adjusted beta methodology.
10. Returns include dividend payment and other corporate actions.
11. Financial debt includes both long‐ and short‐term debt.
12. To confirm announcement date, each transaction was cross referenced with ASX Announcements database. If an announcement occurred after the close of trade, the following trading day was employed as day 0.
13. Connect 4 is a well regarded private company provider of Australian Stock Exchange (ASX) information to universities, government departments, banks, stockbrokers and other such finance researchers.
14. We investigated all M&A trades during the 1995–2008 period, no M&A transactions occurred in 1995 and 2008.
15. See Jensen and Ruback (Citation1983), Andrade, et al, (Citation2001), and Kiymaz and Baker (Citation2008).
16. Median half‐year discount to NTA of 41% (BDO, Citation2009).