Dexus lobs improved $4b offer for CPA

Dexus Property Group has landed its expected sweetened offer for Commonwealth Property Office Fund (CPA) in a bid to dislodge the rival GPT Group's offer.

Under the new deal, Dexus and its joint venture partner, the Canada Pension Plan Investment Board (CPPIB), will offer shares and cash equal to $1.27 per CPA share in an unconditional bid, valuing the target at $4 billion.

That is 3¢ higher than Dexus's first offer and 2.6 per cent higher than GPT's, given the recent fall in GPT's share price.

The deal has changed from a scheme of arrangement to an indicative off-market takeover with no minimum acceptance. GPT's current bid is an off-market takeover with 50.1 per cent minimum acceptance.

There were suggestions that GPT could come back with a new offer. However, under the Dexus bid, some assets worth about $450 million could be sold to GPT including a 100 per cent interest in 750 Collins Street, Melbourne, and Dexus's 50 per cent interest in 2 Southbank Boulevard, Melbourne.

"We expect GPT to come over the top," Moelis & Co analysts said. "They have already had two failed bids this year, so they won't want a third. The alternative is that they cut a deal with Dexus to split up the assets between them."

"We do not think there is a risk of the bids not being accepted and CPA's management internalised."

The independent directors of CPA, the Commonwealth Managed Investments Ltd (CMIL), and the ultimate owners, the Commonwealth Bank, have said they will return to the discussions with Dexus regarding the new offer.

However, CMIL directors have advised CPA unitholders to take no action while the discussions are underway.

Dexus will also now exercise its option over 14.9 per cent of CPA equal to 35 million units.

The Dexus offer comprises a cash payment equal to 77.45¢ and 0.4516 Dexus stapled securities.

Based on the Dexus's closing price on December 10, the offer values each CPA unit at $1.27 (a 2.6 per cent premium to the GPT's offer on a comparable basis).

Dexus chief executive Darren Steinberg said while the proposed $41 million payment to the bank for the management rights of CPA had lapsed, the cash was still in the mix.

CPA unitholders will be entitled to receive the 3.5¢ CPA interim distribution.

Brokers said that with another open bid still on the table from GPT, it is unlikely investors will accept the current bid.