Dexus Property Group (DXS) and the Canada Pension Plan Investment Board raised their offer for the office fund controlled by Commonwealth Bank of Australia to A$3 billion ($2.7 billion), challenging GPT Group (GPT)’s bid.
Dexus and the Canadian fund sweetened their cash-and-stock bid for Commonwealth Property Office Fund (CPA) to A$1.268 a share, Dexus said in a regulatory filing. That comes after Dexus this week completed an examination of the fund, and compares with an offer of A$1.235 a share made by GPT on Nov. 19, taking into account dividend payments, it said.
GPT and Dexus, Australia’s biggest listed office landlord, are fighting for control of the trust, which has A$3.9 billion of office buildings across the country’s biggest cities, as Commonwealth Bank seeks to exit its property business. Dexus, which has a 14.9 percent interest in CPA, as the fund is called, said last month it would keep its stake, preventing GPT from obtaining full control.
“One could argue that the increased bid has been structured from the due diligence that Dexus did, and that’s not a situation GPT can mirror,” having chosen to forego a review of CPA’s operations, said Winston Sammut, managing director of Sydney-based Maxim Asset Management. “CPA’s board would have to go for the higher offer, and that’s Dexus’s bid.”
CPA’s manager, Commonwealth Managed Investments Ltd., said its independent board will consider the increased offer from Dexus and the Canadian fund, and will issue an opinion on the bid and GPT’s earlier proposal “in due course.” It told shareholders to take no action on today’s offer.
CPA shares climbed 2 percent to A$1.275 at the close of trading in Sydney, compared with a 0.8 percent drop in the benchmark S&P/ASX 200 Index. (AS51) Dexus shares fell 0.5 percent to A$1.01 and GPT securities slipped 0.9 percent to A$3.39.
The proposal “reinforces Dexus’s strategic objective of office sector leadership,” Darren Steinberg, chief executive officer of Dexus, said in a telephone interview. “It brings together two complementary office portfolios and provides CPA unit holders with an ongoing investment in an A-REIT with a similar risk profile to an investment in CPA.”
Today’s bid values all of CPA, including the stake Dexus already owns, at A$3 billion, according to the bidder.
Dexus and the Canadian fund raised the cash component of their bid to 77.45 Australian cents, from 72.65 earlier, while maintaining the stock offer at 0.4516 Dexus share for each CPA security. Dexus’s bid today, an off-market takeover proposal, has no minimum threshold to begin accepting CPA shares, compared with a requirement of 75 percent support for its previous offer and 50.1 percent under GPT’s proposal, it said.
Dexus and CPPIB have agreements in place if they acquire less than 100 percent of outstanding CPA shares, which will be outlined in the official bidder’s statement that Dexus will file this month with the stock exchange, according to the statement. CPA shareholders can begin selling into Dexus’s offer in mid-January, Steinberg said today.
GPT controls 8 percent of CPA, regulatory filings show.
Excluding a planned distribution by CPA to its security holders of 3.5 cents a share, Dexus and CPPIB’s increased offer is valued at A$1.233 for each CPA share, compared with their earlier bid of A$1.2052, Dexus said.
Dexus also plans to pay A$41 million to Commonwealth Bank for the management rights to the fund, it said. GPT’s offer doesn’t include any extra payment for management rights, CEO Michael Cameron said on Nov. 10.
Commonwealth Bank will discuss the transfer of CPA’s management rights to Dexus, the lender said in a separate statement today. The sale of the management rights will depend on Dexus acquiring 50.1 percent of the fund, the bank said.
Dexus and CPPIB first made an offer for CPA valued at A$1.15 a share in October, which CPA’s manager rejected. They followed that with a sweetened A$1.2052 a share bid last month, which CPA’s manager accepted, allowing Dexus exclusive access to details of the fund’s operations.
GPT entered the fray the following week with a proposal valued at A$1.24 a share for CPA, saying it didn’t need to examine the fund’s books. CPA’s manager revoked Dexus’s exclusive access to CPA, while letting the company continue with due diligence, which ended Dec. 9.
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