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DataRoom AM: Determined Dexus

Dexus lobs a counterbid to GPT's play for CPA, while Woodside's Leviathan project may finally get the go-ahead.
By · 22 Nov 2013
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22 Nov 2013
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There’s plenty of action in the real estate sector, with a 20 per cent block trade in Australand proceeding as planned and Dexus Property Group staring down a stalemate with GPT Group for control of the Commonwealth Property Office Fund. A stalemate is not really an option for either party, which means something is likely to give soon.

Elsewhere, Woodside Petroleum may soon finalise an entry into the mammoth Leviathan gas field, BHP Billiton continues to mull opportunities for non-core divestments and more details emerge about a few big December floats.

Dexus Property Group, GPT Group, Commonwealth Property Office Fund, Mirvac Group, CapitaLand, Australand, Stockland

Dexus Property Group has responded aggressively to GPT Group’s $3 billion rival bid for control of the Commonwealth Property Office Fund (CPA), informing the market it will not sell its 14.9 per cent stake in CPA to GPT.

The announcement, which came as little surprise, tees up the prospect of a stalemate, with GPT consequently unable to reach the 90 per cent acceptances it is after to assume full control.

There are concerns about GPT being left overloaded with debt if it gets stuck in the 50-90 per cent acceptances range as it will be unable to on-sell $1.1 billion of office towers to a related fund.

Such a circumstance, however, helps neither Dexus nor GPT and means, unlike the possible stalemate in the frenzied bidding for Warrnambool Cheese and Butter, a long-running stand-off is not likely.

Instead, either Dexus – which is pushing ahead with due diligence on CPA – will raise its offer one last time to trump GPT, or the two parties will come to an agreement to split the CPA assets.

The likelihood of the former is high, though Dexus and joint venture partner Canada Pension Plan Investment Board have already raised their bid once and are already pushing toward the upper limit of their valuation. The latter option of splitting assets would likely be a challenge between two rivals – especially given they are both looking to claim the position of largest office landlord in the country through this deal.

Still, Dexus insists it is keeping its options open for now.

“Dexus reserves its rights to change its intention if new information about the GPT bid is released to the market or the terms of the GPT bid change,” the group said in a statement.

In the meantime, the share prices of GPT and Dexus are falling, which leaves both their cash-and-scrip bids on a downward spiral.

Elsewhere, the sale of 20 per cent in Australand by major shareholder CapitaLand has been received with limited enthusiasm.

Some reports suggested that Citigroup, which ran the $426 million sale, was left hanging onto stock, though The Australian believes this was in fact not the case.

The block trade priced at $3.685, which was at the lower end of the range, though still a minimal 1.7 per cent discount from the price of Australand securities at the time the sale was announced. But already it is out of the money for those institutions who bought into it, with Australand shares drifting 4 per cent lower to $3.60 yesterday.

Also in property, Mirvac Group has priced a $506 million notes issue, with the transaction heavily oversubscribed beyond the $150 million target. The company has been taking advantage of a recent upgrade in its credit rating by Standard & Poor’s to tap global debt markets.

Woodside Petroleum

Things are looking up for Woodside Petroleum’s interest in the massive Leviathan oil and gas project in Israel, with reports that a deal could finally be signed this week.

It has been a long process for the Western Australian-based firm after it first signed a memorandum of understanding to acquire a 30 per cent stake in December last year in what chief executive Peter Coleman has dubbed a “once-in-a-decade opportunity”.

Since then the company has waited patiently for a final decision on Israel’s gas export policy, and after receiving clearance a few weeks ago, sought to finalise the deal.

However, the JV partners in the project – Delek Group (45 per cent), Noble Energy (40 per cent) and Ratio Oil Exploration (15 per cent) – have been holding out for more cash given the increased reserves shored up over the year. Crucially, a plan to build a pipeline to Turkey also put Woodside’s position in doubt, with its expertise in floating LNG less valuable to the project’s development.

According to the Israeli-based Haaretz, the deal hasn’t gone cold, with executives of the firms, including Coleman, meeting in New York this week. The report suggests a formal contract is likely to be signed before week’s end, though it could see Woodside fork out as much as 30 per cent as it had originally agreed to. Given the price gap and the slow-and-steady approach of Woodside, that timeline may be on the optimistic side of the ledger.

The news comes after reports that plans to drill for oil at the project have been delayed indefinitely.

As it stands, Woodside is set to pay $US1.3 billion ($1.38 billion) plus royalty payments of up to $US1 billion.

Pact Group, Cover-More, Bis Industries, Veda, Vocation, IPO market

Packaging company Pact Group will list on December 17 in a float that is expected to raise $649 million.

The Raphael Geminder-run group will price at $3.80 per share, which will deliver a market capitalisation of $1.12 billion and an enterprise value of $1.72 billion, toward the low end of expectations. When the float was first mooted valuations ran around the $2 billion mark.

Geminder will retain a 40 per cent stake in the business once listed.

In other IPO news, a float of insurance firm Cover-More is still possible before Christmas, with The Australian reporting that analysts may start marketing the company next week. Owner Crescent Capital Partners has reportedly hired UBS and Macquarie Group to pursue the listing, which has been rumoured to raise as much as $700 million.

It would be a quick turnaround for the investment banks, meaning there is every chance the IPO could still not be seen this side of the New Year.

Elsewhere, credit bureaux Veda Group and education and training provider Vocation closed their IPOs early amid robust demand.

It is the latest sign of a strong IPO market, with the Pacific Equity Partners-owned Veda to raise $341 million and Vocation to raise $253 million.

Both companies will hit ASX boards in early-mid December.

BHP Billiton

BHP Billiton, like close rival Rio Tinto, appears far from over its divestment spree.

In the past year the company has offloaded assets worth around $7.5 billion and BHP Billiton chairman Jacques Nasser yesterday told investors at the miner’s Australian AGM that more asset sales were on the agenda, though they will be “patient and disciplined” to ensure nothing is sold on the cheap.

Noting that the group had received a “substantial premium” on recent non-core asset sales, Nasser said the very diverse BHP Billiton portfolio would be simplified over time.

Earlier this year it was reported that around 10 assets could be up for grabs and that as much as $25 billion worth of non-core assets shed by the time the simplification program is finished.

Among deals already completed by the miner are the sale of its Pinto Valley copper mine in Arizona and the auction of its stake in the Browse LNG joint venture to PetroChina, which combined reaped around $2.5 billion.

Among the options for BHP Billiton are the continued sell-off of non-core oil and gas acreage as well as the divestment of its aluminium, manganese and nickel assets.

Wrapping up

Macquarie Bank is set to sell its stake in Regis Aged Care back to the group’s founders, according to The Australian. The deal could be worth around $150 million and comes as there’s been plenty of movement within the aged care sector, the latest being rumours this week of a $500 million float of Japara Holdings.

In media, it appears any plans News Corp Australia may harbour to acquire Ten Network Holdings wouldn’t be shot down by media regulators after Jennifer McNeill, a senior executive at the Australian Communications and Media Authority, told a Senate hearing that a hypothetical deal between the two would “not necessarily be problematic”. While there has been plenty of media speculation about the prospect, News so far has not shown any concrete interest.

In the seafood sector, Ervin Vidor is looking to offload Seafarm, reportedly the largest prawn farm in the country, for $20 to $30 million. The news comes on the back of reports of the auction of leading Victorian seafood distributor Clamms as well as the country’s largest abalone farm, Jade Tiger Abalone. Boutique investment bank Kidder Williams, which is assisting Bega Cheese in the WCB fight, is advising on the sales of all three business.

In resources, Uranium miner Paladin Resources has again stoked expectations of a sale of a minority stake in its flagship mine. The seemingly stalled process to offload part of the Langer Heinrich development in Namibia has been “rejuvenated”, according to the group’s chairman Rick Crabb.

Finally, ASX-listed gold miner Stonewall Resources will offload its key Stonewall Mining subsidiary to China-based Shandong Qixing Iron Tower Co, according to the Wall Street Journal. The $141.5 million deal is likely to see shareholders receive almost twice the 13 cent share price the company was trading at prior to requesting a halt on its shares.

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Daniel Palmer
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