It’s not going to be a repeat of the great Warrnambool Butter and Cheese (WCB) auction, but the developing takeover battle for control of Commonwealth Property Office Fund (CPA) shows that CBD property in Australia, while a much larger and expensive group of assets, doesn’t have a strong story such as dairying and selling oodles of milk products to China.
But the counter bid for CPA from GPT promises to be an amusingly lucrative end to 2013 and start to 2014 for some advisory types and legal beagles in Sydney.
GPT sprung its offer, worth it said $1.272 for every CPA unit yesterday. GPT is offering $0.75325 in cash and 0.141 of a GPT security for each CPA unit.
GPT units finished down 6c at $3.62, CPA units rose 6c to $1.265, so the GPT bid fell to $1.263, still well above the rival bid.
GPT Vs DXS Vs CPA YTD – GPT makes late $3bn play for CPA
It was 7% higher than the Monday closing price of $1.205 and values CPA at $2.985 billion, or around $4 billion when you throw in the debt on CPA’s balance sheet.
GPT argued in support of its offer that success would create Australia’s largest office investor, with a solid spread of hard to replace offices.
Rival real estate investor, Dexus (DXS) which owns 14.9% of CPA, has a joint bid on the table with the Canada Pension Plan at $1.15 a unit in cash and shares (71 cents cash plus 0.4516 Dexus shares).
That was made five weeks ago and Dexus and its partner are now in due diligence of CPA’s books.
Now GPT has popped in the higher offer, which seems a little quixotic given the head start Dexus and its Canadian partner have with the 14.9% stake.
GPT could only claim support from the holder an 8% stake in CPA yesterday, which hardly seems enough.
But the higher offer will force CPA and its advisors to examine the offer and they may very well be forced to shift their support to GPT in the absence of a higher offer from Dexus and the Canadians.
They can, however, sit on their 14.9% stake and frustrate GPT if they feel there’s an advantage (i.e. some assets in CPA) that might be exchanged in return for accepting the GPT offer. (Not that there can be any linkage between acceptance and asset sales.)
GPT though has set the acceptance level at the low bar of 50.1%, indicating to Dexus and the Canadians that it is willing to have control, but not total control.
CPA is part of the Commonwealth Bank of Australia, which is looking to rationalise some of its investment arms.
CPA owns 25 office blocks in Australia including 13 in Sydney, five in Melbourne and two each in Brisbane, Perth and Adelaide. At June 30, its portfolio’s occupancy rate was a solid 96.2%.
CPA recently sold a Sydney building with a 15% premium to book value. Analysts point to that deal as signalling that there might be a bid or two more in the offing for the property group.
