Australia’s largest industrial property company Goodman Group Ltd is in a trading halt as it looks raise A$4.4 billion to support growth in its data centre and logistics operations.
The raising is the largest in Australia so far this year and is being managed by JPMorgan, Morgan Stanley and RBC.
Shares are being offered at A$33.50, representing a 6.9% discount to the last closing price of A$35.98. The company will issue 119.4 million shares to institutional investors, followed by a A$400 million security purchase plan, which will not be underwritten.
The funds will provide Goodman with greater financial flexibility to pursue expansion opportunities in key sectors.
This move comes less than three months after China Investment Corporation (CIC), a major shareholder in Goodman, divested a A$1.9 billion stake, representing 2.6% of the company.
CIC initially sold shares at A$37.55 each but the price was later adjusted to A$36.85 after Citi was unable to place the full allocation, leaving the bank holding approximately A$1 billion in stock.
"Goodman Group has continued its push to rapidly expand its data centre business, announcing a $4 billion capital raise in its first-half fiscal year results,” eToro market analyst Josh Gilbert said.
“The capital raise will be the main talking point, but operating profit rose 8.4% year-over-year, while revenue climbed 25%. They also reaffirmed their full-year earnings guidance, which the market will be happy with.
"Overall, the results were good, but the market will focus on the capital raise and likely see this as a big positive.”
Exposure to data
Goodman’s share price has climbed over the past year as investors seek exposure to the data centre sector, where the A$69 billion company has a significant presence.
Demand for data centres remains strong, driven by artificial intelligence and cloud storage requirements. Blackstone and its partners underscored this trend with a A$24 billion acquisition of data centre giant AirTrunk last year.
“It’s clear that the need for robust, scalable data centres is more critical than ever as the AI revolution continues, and Goodman is putting itself in a great position to keep benefiting from the surging demand,” Gilbert said.
“This is a business that is no longer just a ‘REIT’ and is instead forming into a data centre powerhouse. This capital raise only supports that – and ultimately, investors will like this given that returns look set to be far better than in its traditional areas, such as industrial.
"Goodman Group sees data centres as a crucial part of its future and that move could prove to be very prudent if AI growth continues."
Half-year results
The equity raising coincides with Goodman’s half-year results announcement on Wednesday, reporting a net profit of A$799.8 million, up 463% from the previous corresponding period, with revenue rising 25% to A$1.3 billion.
The company disclosed that data centres accounted for 46% of its development pipeline, with projects valued at more than A$10 billion set to deliver 0.5 gigawatts of primary power by June 2025.
Goodman’s global real estate portfolio, spanning Australia, New Zealand, Hong Kong, Japan, North America, Europe and the UK, is now valued at A$84.4 billion.