GPT Group shares jumped by the most in more than three months after its unlisted funds agreed to buy A$1.2 billion ($1.1 billion) of buildings should Dexus Property Group win control of a trust managed by Commonwealth Bank of Australia.
GPT shares climbed 2.6 percent to A$3.58 at the close of trading in Sydney, the biggest gain since Sept. 19. Shares of Dexus rose 3 percent to A$1.03 and Commonwealth Property Office Fund, or CPA as the trust is known, slid 0.4 percent to A$1.24.
Dexus and Canada Pension Plan Investment Board, which are jointly battling GPT for control of CPA, yesterday said they’d agreed to sell four office buildings from the trust to the GPT Wholesale Office Fund for A$679 million if they acquire at least 90 percent of the target’s shares. The Canadian pension fund will also sell its 50 percent stake in the Northland Shopping Center in Melbourne to GPT’s unlisted mall fund for A$505 million on the same condition, GPT said.
“This gives GPT something to walk away with in terms of a potential extra A$1.2 billion of funds” if it’s unsuccessful in its attempt to take over CPA, said Stuart Cartledge, managing director of Melbourne-based Phoenix Portfolios. “And it means GPT is then in a position to recommence a buyback, which is far more accretive to shareholders.”
Yesterday’s deal gives the takeover proposal by Dexus and the Canadian fund a further edge over GPT’s, after CPA’s board and Commonwealth Bank both backed their bid last month. Dexus, whose offer opened to CPA investors yesterday, controls more than 25 percent of CPA shares including Commonwealth Bank’s interest, compared with GPT’s 11.4 percent interest.
As a result of the buildings agreement, Dexus offered CPA shareholders an alternate proposal to its last cash-and-stock bid, offering 84.96 Australian cents and 0.3801 Dexus shares, compared with 77.45 cents and 0.4516 shares earlier. The alternative offer, including CPA’s dividend as of Dec. 31 equates to A$1.272 a share, compared with A$1.27 a share before the deal.
“The striking of the agreement does surprise us and suggests some concession from GPT,” Simon Wheatley, Sydney-based real estate analyst at Goldman Sachs Group Inc., said in an e-mailed note today. “GPT’s share price has been trading at a double digit discount to net tangible assets in recent weeks, which makes the scrip component of its bid challenging for investors.”
CPA shareholders can sell their shares to GPT until Jan. 24. Dexus’s offer closes on Feb. 7.
CPA shares are down 0.4 percent this year, compared with a 0.7 percent drop in the benchmark S&P/ASX 200 index. GPT securities have jumped 5.3 percent and Dexus 2.5 percent.