Dexus sweetener values CPA at $4b

Dexus Property has landed its expected sweetened offer for Commonwealth Property Office Fund in a bid to dislodge the rival GPT Group's offer.
By · 12 Dec 2013
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12 Dec 2013
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Dexus Property has landed its expected sweetened offer for Commonwealth Property Office Fund 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. That is 3¢ higher than the first Dexus offer and 2.6 per cent higher than GPT's, given the recent fall in GPT's share price. It values CPA at $4 billion.

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 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' 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 Investment Management Ltd (CMIL), and the ultimate owners, Commonwealth Bank, have said they will return to the discussions with Dexus over the new offer. CMIL directors have advised CPA unit holders to take no action while discussions are on.

Dexus will 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 closing price on December 10, the offer values each CPA unit at $1.27 (a 2.6 per cent premium to 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 if needed.

CPA unit holders will be entitled to receive the 3.5¢ CPA interim distribution. Any other distribution paid by CPA's independent manager, CMIL, to unit holders during the Dexus offer period will be deducted from the cash consideration payable under the Dexus offer.

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

"Our disciplined approach has allowed us to increase the consideration payable to CPA unit holders," Mr Steinberg said, "while ensuring there are no unnecessary risks or surprises for current and new Dexus security holders."
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