Dexus set to up the ante in CPA battle

Investors in the Commonwealth Property Office Fund (CPA) are expecting a revised offer from joint suitors Dexus Property and Canada Pension Plan Investment Board, in what has become a bidding war after the surprise $4 billion offer from rival GPT.

Investors in the Commonwealth Property Office Fund (CPA) are expecting a revised offer from joint suitors Dexus Property and Canada Pension Plan Investment Board, in what has become a bidding war after the surprise $4 billion offer from rival GPT.

Analysts tipped that Dexus, which has three days to respond to GPT’s counter-offer, would likely match the GPT offer by including a higher cash component of 73¢, versus GPT’s 72¢ a share.

Given both deals are a combination of scrip and cash, CPA investors are being forced to pick which company will be the best manager for the office assets.

Fund managers said the share price movements of Dexus and GPT in coming days would give an indication as to which offer investors were preferring.

On Wednesday GPT closed down 6¢ to $3.56, Dexus fell 0.05¢ to $1.065 and CPA settled at $1.26.

Under the GPT deal, the offer price is equal to $1.24, excluding CPA’s 2014 half-year distribution, compared to the Dexus offer, which values CPA at $1.21.

John Kim at CLSA said he believed Dexus shares would continue to be suppressed in the near term but would be re-rated if it exited its CPA stake, which it bought at $1.1334 a share.

‘‘GPT will likely be under pressure given the net tangible asset dilution, but the deal may have long-term benefits,’’ Mr Kim said.

For GPT chief executive Michael Cameron, it is the third tilt at a company this year and he is yet to be successful.

Dexus chief executive Darren Steinberg has stated his ambition was to make the company the most prominent landlord in the country and has already sweetened his first offer to secure CPA.

Stephen Rich at Credit Suisse estimated that if Dexus were to match GPT’s offer by increasing its cash offer by 2.7¢, that would see the annualised earnings per share accretion reduce from 2 to 2.5 per cent to 1.3 to 1.8 per cent.

‘‘As a result, we see limited scope for [Dexus] to justify any further premium. Furthermore, GPT’s

offer would allow Dexus to crystallise a 12.4 per cent return on its entry price of $1.13 for its 14.9 per cent stake in CPA,’’ Mr Rich said.

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