DataRoom AM: CPA scramble

The market tips escalating bids for CPA, while a surprise partial float of Murray Goulburn adds another twist to the milk wars.

A bidding war has broken out for the Commonwealth Property Office Fund after GPT Group yesterday countered the offer from Dexus Property Group. It is likely Dexus will soon make another play, adding intrigue to what appeared a clear-cut, one-horse race as late as Monday.

Elsewhere, Murray Goulburn Co-operative gears up for an unexpected float, Seven Group chases acquisitions, Rio Tinto adds to its string of recent divestments and a $500 million aged care operator joins the list of IPO candidates for 2014.

Dexus Property Group, GPT Group, Commonwealth Property Office Fund, Commonwealth Bank

Just when it looked like Dexus Property Group was set to claim control of the Commonwealth Property Office Fund (the Commonwealth Bank’s office landlord), rival GPT Group has lobbed in a takeover offer of its own.

The GPT proposal values CPA at $3 billion, around $150 million more than the bid from Dexus and its joint venture partner, Canada Pension Plan Investment Board.

News of a true battle for control of CPA forced the company’s stock up 5 per cent, while Dexus and GPT shares fell on concerns the auction is not over yet. Indeed, it is unlikely that Dexus, which had the approval of CPA’s independent board for a takeover, will sit back and let GPT take control without at least offering one more bid.

It certainly helps Dexus that it has a joint venture partner in CPPIB, which has incredibly deep pockets, while its 15 per cent stake in CPA means it retains a strong hand in the fight.

For GPT, meanwhile, it would represent the first significant acquisition of chief executive Michael Cameron’s four-year tenure. He has, however, failed in past attempts to buy Australand Property Group’s $3 billion office and industrial portfolio and a Lend Lease industrial fund.

But GPT also has a strong hand in the battle thanks to its higher bid and its pursuit of a more conventional takeover offer. Dexus is committed to a scheme of arrangement, which takes longer to implement.

GPT has, however, likely upset the Commonwealth Bank by not offering any cash in the way of management fees. The Dexus deal, on the other hand, gifts $41 million to the banking giant.

Both players are looking to claim the position of Australia’s top office property owner and won’t go quietly into the night now they have both declared their hand. But Dexus is likely to wait at least a few days before mulling a new offer given both proposals are cash-and-scrip, and consequently subject to changes in value on a daily basis.

Murray Goulburn Co-operative, Warrnambool Cheese and Butter Factory, Saputo, Bega Cheese

Murray Goulburn Co-operative, one of three suitors in the ongoing stoush for control of Warrnambool Cheese and Butter Factory Holdings, is likely to seek a partial float on the ASX, according to The Australian.

The shock move from the farmer-owned dairy co-operative is expected to be announced at the group’s AGM on Friday and would represent another twist in the long-running takeover battle. According to the report, Murray Goulburn will float a shareholder fund on the exchange, while farmers will retain shareholdings in the unlisted Murray Goulburn co-op. It would consequently maintain a similar structure to that of New Zealand giant Fonterra.

If true, it is almost certainly a precursor to a new bid from Murray Goulburn, which could reach as high as $10 a share. This is viewed as necessary for the group to retain its position in the fight given it’s the only bidder without regulatory approval and consequently the only suitor that hasn’t been able to take its bid unconditional.

Should Murray Goulburn’s offer hit $10, the premium over the WCB board-approved $9-a-share proposal from Saputo may be enough for the board to shift its favouritism to Murray Goulburn, despite the regulatory uncertainty.

Meanwhile, a retreat in Bega’s share price yesterday leaves the smallest suitor’s cash-and-scrip deal on par with the $9-a-share cash offers from Murray Goulburn and Canada’s Saputo.

That, in a nutshell, sums up the state of affairs, with a stalemate looking a very real possibility.

National Storage, Japara Holdings

The $123.7 million float of National Storage REIT has been well received by fund managers ahead of a bookbuild for institutional investors today.

The sale of close to half of the storage facility owner values the business at $240 million. The company will hit ASX boards on December 23, with funds raised to fuel the group’s acquisitive streak.

Meanwhile, a major player in the Australian nursing home sector, Japara Holdings, is planning a listing of its own next year.

According to The Australian, Japara is working with Macquarie Bank on an IPO that would value the company at around $500 million. The report comes a month after chief executive Andrew Sudholz said the group was looking to raise capital to fund new developments or bolt-on acquisitions.

Two years ago the aged care firm was close to sealing a sale to private equity firm Blackstone for around $450 million, but negotiations stalled on price disagreements. Japara advisor UBS was unable to find another suitable buyer.

Japara owns and operates 35 nursing homes and five retirement villages in Victoria, New South Wales, South Australia and Tasmania.

Elsewhere, strong retail interest and cornerstone investors will see this week’s Dick Smith Electronics bookbuild a rather brief affair, with only $26.4 million of stock up for grabs, according to The Australian Financial Review.

Rio Tinto

Rio Tinto’s push to offload non-core assets shows no signs of abating, with two deals made yesterday to refocus the business.

The first, and most significant, was news of a sell-down in its stake in aluminium products company Constellium. The offloading of shares, confirmed by a Securities Exchange Commission filing yesterday, leaves Rio Tinto with an extra $US330 million ($351.3 million) after reducing its shareholdings from 28 per cent to 9.2 per cent.

Constellium is an offshoot of Alcan, which Rio Tinto picked up around the top of the market in 2007. The miner sold a majority stake in the business to Apollo Global Management in 2011.

Elsewhere, Rio Tinto has divested two coal exploration licenses in Queensland.

ASX-listed Mozambican Coal paid $375,000 for the assets, with milestone payments of up to $3 million due if a measured resource over 50 million tonnes is achieved and on commencement of export shipments.

Other deals pursued by Rio Tinto this year include the $US820 million sale of its majority stake in the Northlake’s mine in July and the divestment of its Clermont thermal coal mine for just over $1 billion last month.

Seven Group Holdings

Seven Group Holdings has declared M&A activity is firmly on its agenda, with the mining and media empire keen to offset the mining investment slump that is hurting profits for its key Westar business.

It is expected that Seven chief executive Don Volte’s oil and gas expertise could be called on during the planned expansion, with the former Woodside Petroleum boss very much at home in the sector.

"We're looking at those areas," Volte told The Australian. "I think what we're trying to say is that we've been given the remit from the chairman to take a look at growing Seven Group."

That remit, Volte told shareholders at the company’s AGM yesterday, has seen the executive team hunting opportunities in the industrial services, energy, food and water sectors.

"We have several parties that want to partner with us,” Voelte informed investors.

Wrapping up

The New Zealand government has secured buyers for 20 per cent of Air New Zealand. The government reduced its stake from 73 per cent to 53 per cent as part of a drive to improve the budget, which has seen the privatisations of Meridian Energy and Mighty River Power this year. The deal raised $NZ365 million ($325 million).

Meanwhile, partners in the massive Leviathan oil and gas project in Israel have indefinitely delayed drilling of the oil-bearing strata, according to Globes. The companies in the joint venture have yet to make a final investment decision and a proposed 30 per cent stake in the venture for Woodside Petroleum remains up in the air despite the Australian energy firm signing a memorandum of understanding last year.

Finally, local private equity firm HighPoint Capital has acquired a large minority stake in digital channel owner and operator Brand New Media Pty Ltd, according to the Wall Street Journal

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