Dexus Won’t Accept GPT’s Offer for Commonwealth Office Fund

Dexus Property Group, Australia’s biggest listed office landlord, said it won’t accept GPT Group’s A$1.27-a-share offer to take over Commonwealth Bank of Australia’s office trust, in which it has a 15 percent interest.

Dexus will continue with due diligence of its own bid, made in partnership with the Canada Pension Plan Investment Board, the Sydney-based company said in a statement to the stock exchange today. GPT’s offer needs the acceptance of 50.1 percent of Commonwealth Property Office Fund’s shareholders to succeed.

Dexus and GPT are fighting for control of the trust, which has A$3.9 billion ($3.6 billion) of office buildings across Australia’s biggest cities, to boost their assets under management and increase the quality of their property portfolios. Dexus in July agreed to buy its 14.9 percent stake in CPA, as the fund is known, the day after Commonwealth Bank said it would exit property management.

“Dexus has taken tactical moves beforehand, and this is where there’s scope for them to exploit them,” said Tony Sherlock, Sydney-based head of property research at Morningstar Australasia Pty. “Dexus’s bid is at the upper end of most investors’ comfort range, so I’m not anticipating a sweetened offer from Dexus. But that’s not to say that more offshore money couldn’t come in.”

GPT Offer

GPT said this week that it has an agreement in place to sell A$1.1 billion of CPA’s buildings to GPT’s unlisted office fund should it be able to proceed with compulsory acquisition of all shares in the office trust. Dexus’s move today blocks GPT from proceeding with that part of its plan, Dexus said.

“If you end up being a minority shareholder in a reasonably illiquid vehicle, I’m not sure what the benefits are to you,” GPT Managing Director Michael Cameron told investors yesterday. “Particularly if you’ve gone beyond the point of accepting our bid, you’ve sort of missed out on that opportunity as well. That’d be a bad situation to be in.”

GPT may restructure its arrangement with its unlisted fund, enabling it to sell the buildings despite Dexus’s blocking stake, Sherlock said. If GPT is successful, Dexus is likely to sell its shares, he said.

GPT’s bid this week compared with a sweetened Nov. 11 cash-and-share proposal equal to A$1.2052-a-share made by Dexus and the Canadian pension fund, which was backed by CPA’s manager after it rejected their first A$1.15-a-share offer last month.

The Canadian fund remains committed to the proposal, Dexus said today. The company reserves the right to change its mind if new information about GPT’s bid emerges, Dexus said.

Dexus shares closed 1.4 percent lower at A$1.05 and CPA shares rose 0.4 percent to A$1.265 in Sydney today. GPT securities fell 1.7 percent to A$3.50, compared with a 0.4 percent drop in the benchmark S&P/ASX 200 Index.

Before it's here, it's on the Bloomberg Terminal.