Peet completes Flagstone City joint venture deed

Peet Limited (ASX: PPC) has executed a joint venture implementation deed covering its Flagstone City development project in Queensland, Australia.

The agreement was signed with Bechel Pty Ltd and Hurose Pty Ltd, which is acting as guarantor. It sets out the planned sale of a 49.9% interest in Peet Flagstone City Pty Ltd to Bechel.

The transaction is based on an agreed inventory value of A$615 million. It is intended to take effect if the proposed acquisition of Peet by Ingenia Communities Group (ASX: INA) proceeds under the scheme arrangement announced in August.

Under the planned ownership structure, a Peet subsidiary would retain the remaining 50.1% interest in the project. That subsidiary would also become development manager for Flagstone City following completion of the wider transaction.

Takeover condition moves forward

The signing of the deed meets one part of the Flagstone joint venture condition contained in the scheme implementation agreement between Peet and Ingenia.

The broader takeover plan involves Ingenia seeking to acquire all shares in Peet. The Flagstone arrangement was included to establish how the large residential development would be held and managed after any acquisition is completed.

Further requirements remain outstanding before the joint venture condition can be fully satisfied. These include approval from the Australian Competition and Consumer Commission (ACCC) and the absence of circumstances that would allow any party to terminate the joint venture deed or decline to complete it.

Flagstone City is a master-planned residential project in south-east Queensland and forms a material part of Peet’s development pipeline.

Break fee provision included in agreement

The deed also contains provisions for a possible termination of the acquisition process. If Ingenia is required to pay Peet a A$10 million reverse break fee and the joint venture deed remains in effect, Peet would contribute A$1 million to Bechel for negotiation and commitment costs.

Hurose holds approximately 2.18% of Peet shares and operates within the wider Brown-Neaves Investments group.

Following the announcement, Peet shares were trading at A$1.50 on the Australian Securities Exchange (ASX). The company had previously reported full-year net operating profit of A$103.4 million and A$851 million in contracts on hand.