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SYDNEY-General Property Trust and Lend Lease have agreed to terms that would result in a merger of the two companies into a potentially A$11.7-billion entity. In addition to a slight increase in the total value of the consideration to be paid to GPT, Lend Lease agreed to effectively reimburse GPT for the A$3.4-million first half performance fee it received, to convert a controversial on-market share buyback to off-market, and to offer a way for around 50,000 small GPT unitholders to cash out their interests.Sydney-based Lend Lease, which manages GPT, is buying the trust in part to ensure the future of its management fees. Lend Lease earned A$280 million in 2003 from managing General Property’s A7.7-billion portfolio of hotels, office buildings and shopping malls. Lend Lease’s offer is based on a stapling of Lend Lease Shares and GPT units. Two weeks ago, GPT rejected an enhanced offer from Lend Lease that the total value of the consideration by 10 cents to A3.56 a GPT unit. The offer decreased the ratio of Lend Lease Shares for GPT units from 1:3.8 to 1:3.9 but raised the one-time cash distribution to GPT unitholders from 47 cents per unit to 64 cents per unit. In rejecting the offer, GPT cited concerns regarding the higher risk associated with Lend Lease’s development and construction arm and adequate compensation for GPT’s relatively secure, high-quality property portfolio. The agreed upon offer raises the total value of the consideration to A$3.58 per GPT unit from A$3.56 by increasing the ratio of Lend Lease Shares for GPT units back to 1:3.8 and raising the one-time cash distribution to GPT unitholders from A64 cents per unit to A65 cents per unit. The distribution level is subject to small investor take up of the cash facility of $3.48 per unit. The cash-out facility is subject to the aggregate amount of cash not exceeding $1.31 billion.Prior to stapling, Lend Lease shareholders also would receive a special distribution totaling $95 million estimated at A26 cents per unit, after completion of the share buyback, which Lend Lease will shift from an on-market effort to an off-market one after its results are released on August 18. Additionally, an interim distribution of eight cents per GPT unit and a dividend of 22 cents per Lend Lease unit would be paid for the period from July 1 and up to the date of the merger.The new entity would have a board comprising three existing GPT directors, five existing Lend Lease directors and one or more new directors. The offer will be put to share and unit holders at a meeting in November.

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