DataRoom AM: Dexus drive

Property is in the limelight as Dexus makes a bold, multi-billion dollar bid for the Commonwealth Bank’s listed office landlord with some help from a Canadian pension fund. The hostile offer may yet need a boost, with the Commonwealth showing little interest thus far. Elsewhere, the OzForex float may kickstart an IPO boom, Nine Entertainment mulls a buyout of Microsoft’s stake in Mi9, Westpac readies for ACCC scrutiny of its Lloyds deal and the owner of Boost Juice considers a sale or float.

Dexus, Commonwealth Property Office Fund, GPT

A mammoth property deal is brewing, with ASX-listed Dexus – in conjunction with the Canada Pension Plan Investment Board – making a play for the Commonwealth Property Office Fund.

The 50-50 JV offer from Dexus and CPPIB would see it acquire Commonwealth’s $3.7 billion Australian office portfolio, though the current offer of 68 cents cash and 0.4516 Dexus shares for each CPA security appears on the light side.

On Friday’s closing prices it would value CPA at $1.16 a share, or around $2.7 billion, which is basically what it traded at pre-offer. Little wonder then that Commonwealth Management Investments Limited, which manages CPA, has told shareholders to sit tight for now.

CMIL also has a proposal on the table from the Commonwealth Bank for the internalisation of the management of CPA.

“(We) will now also consider the Dexus Proposal and any other alternate proposal for CPA that may emerge,” the company said in a brief statement.

Last week there were rumours that Dexus rival GPT could also lob in an offer for CPA, which owns 26 office properties across the country.

Whether another suitor makes a move or not, Dexus is well prepared to up its offer with CPPIB – which has almost $200 billion of funds under management – beside it. The market expects it may need to do that, with shares of CPA climbing 3 per cent to $1.19 on Friday, three cents above the current indicative price.

The independent board committee of CMIL is being advised by UBS and Ashurst.

OzForex, Meridian Energy, Nine, IPO market

The float of online foreign exchange business OzForex was met with the kind of enthusiasm that could set the fire under the long stalled IPO market.

The most heavily traded stock on the ASX throughout its first day of trading on Friday, the company’s price soared as much as 33 per cent above its listing price of $2, before finishing 28 per cent higher at $2.56.

The market capitilisation of the company consequently rose to $614 million from $480 million at the start of the day, leaving plenty of investors smiling.

Attention now shifts to the next entrants to the ASX, the biggest of which are likely to be Meridian Energy and Nine Entertainment. According to The Australian Financial Review, Nine is keen to acquire the 50 per cent share of digital media company Mi9 that it doesn’t already own from Microsoft. The deal would bring an end to a joint venture that has operated since 1997.

The report suggested talks were at an advanced stage and would not impact on the current proposed December 9 listing date.

New Zealand-based Meridian, meanwhile, is on a mission to drum up a final boost to support ahead of its bookbuild and consequent dual listing on the New Zealand and Australian stock exchanges, sending chief executive Mark Binns across the Tasman this week, the AFR reported. Australian investors are expected to be able to access around $400 million in stock.

Lloyds, Westpac, ACCC

Westpac has officially tied up a $1.45 billion deal for the Australian loan book of Lloyds. The sale marks the end of the British bank’s foray into Australia, which was marred by losses post-GFC, sparked by the crash in Gold Coast property values. Its final retreat includes a motor vehicle finance book of $3.9 billion, an equipment finance book of $2.9 billion and a corporate loan portfolio of $1.6 billion.

Westpac, meanwhile, has one more hurdle to jump – competition regulator the ACCC. The watchdog has initiated an informal review, with its head – Rod Sims – recently quoted as saying he would be concerned should Macquarie or Westpac pick up the Lloyds assets given their positions in the car financing sector.

Westpac will argue that Lloyds’ plans to exit meant its competitive strength was diminished, while also noting that plenty of other borrowing options for car buyers mean its market share is overstated. The big four bank wouldn’t have made its biggest acquisition in five years if it didn’t see it clearing the ACCC.

That being said, Sims’ comments raise the potential the watchdog may seek to impose conditions on the deal, though it has hardly done much to stand in the way of other big bank deals in recent years with takeovers of Bankwest and St George getting the green light. As it stands, the regulator has called for submissions into the proposal by October 30, with a provisional date for its decision set as November 28.

Deals of this size find a way of going well beyond initial deadlines, so expect the ACCC to ask Westpac for more details in mid-November before a decision likely comes out just prior to Christmas.

Westpac, for its part, is hoping to finalise the transaction on December 31.

Boost Juice, Retail Zoo, The Riverside Company, UBS

US-based private equity group The Riverside Company could look to crystallise gains it has made from its first foray into Australia through a sale or public listing of Retail Zoo, according to The Australian.

Riverside bought 70 per cent of Retail Zoo, the owner of Boost Juice as well as Cibo Espresso and Salsa’s Fresh Mex Grill, for $65 million back in 2009. The rest of the business is largely held by founders Jeff and Janine Allis, who both remain on the board.

According to the report, investment bank UBS has been called on to advise, with a sale in the coming months considered the most likely outcome. But with an improved IPO market, a float could become too lucrative to ignore.

Wrapping up

In media, talks are continuing on a possible merger between Macquarie Radio Network and Fairfax Radio, according to The Australian. The paper suggests UBS will be called on by Macquarie Radio to help with the deal, while Fairfax could use the services of Macquarie Bank.

Meanwhile, Archer Capital’s Growth Fund is rumoured to be considering a float of CURA Day Hospital Group in preference to the private sale process that it has already started, according to the AFR. The day surgery business may be worth around $170 million, the report said.

Finally, the UK listing of the Royal Mail went off with a bang on Friday. The float was a staggering 20 times oversubscribed by fund managers, leading to a feeding frenzy upon opening. The company’s stock eventually finished 38 per cent higher.