GPT Group (GPT), Australia’s third-biggest diversified property trust by market value, made a A$ 3 billion ($ 2.81 billion) offer for Commonwealth Bank of Australia’s listed office trust, trumping a A$ 2.9 billion rival bid. Commonwealth Property Office Fund (CPA) shares surged to the highest in almost five years.
GPT’s offer is equal to A$ 1.27 a share for each unit of the office fund, based on yesterday’s closing price, the Sydney-based company said in a regulatory filing today. That compares with a sweetened cash-and-share proposal equal to A$ 1.2052 made on Nov. 11 by Dexus Property Group (DXS) and the Canada Pension Plan Investment Board, which the board of the office fund’s manager said it would recommend in the absence of a superior bid.
The move by GPT would expand its external funds management platform by A$ 1.1 billion to A$ 8.2 billion, putting it on course to grow assets by A$ 10 billion as planned. Commonwealth Bank began receiving offers for CPA, as its office fund is known, after the lender said in July it planned to exit its property management business.
“CPA shareholders are finally getting what they should have gotten in the first place, which was a genuine auction,” Stuart Cartledge, managing director of Melbourne-based Phoenix Portfolios, said by telephone. “It leaves Dexus in a very, very difficult position. Whether they’ll increase the bid is a function of how they can make the numbers stack up.”
CPA shares jumped 5 percent to A$ 1.265 at the close of trading in Sydney, the highest level since December 2008, compared with a 0.6 percent drop in the S&P/ASX 200 Index. (AS51) GPT was 1.6 percent lower at A$ 3.62, while Dexus fell 1.8 percent to A$ 1.07.
The board of CPA’s manager, a unit of Commonwealth Bank, said in a separate filing it will consider the offer, and that no action is required from shareholders. Dexus and CPPIB, the Toronto-based Canadian pension, acknowledged the bid and declined to comment further in a statement to the stock exchange.
On a like-for-like basis including expected distributions to shareholders, GPT said its offer of 0.141 of its own shares and 75.325 Australian cents equates to A$ 1.24 for each CPA unit compared with A$ 1.21 offered by Dexus and CPPIB.
GPT’s offer is a 7 percent premium to CPA’s net tangible assets, and a 6 percent premium to CPA’s closing price yesterday, the company said.
Including CPA’s debt, the total value of the transaction is A$ 4 billion, GPT said.
Dexus agreed to buy a 14.9 percent stake in CPA in July, and followed that with a bid valued at A$ 1.15 a share in partnership with CPPIB in October, which was rejected by CPA’s manager.
The two groups increased their offer to A$ 1.2052 a share this month, after CPA said the value of its assets had increased by 4 Australian cents to A$ 1.19 a security as of Oct. 31. CPA’s manager agreed to grant Dexus exclusive due diligence until mid-December in response to that proposal.
Dexus is unlikely to hold on to its stake if it chooses not to make an increased offer, Cartledge said today.
GPT has acquired 6.5 percent of CPA shares, it said in a separate filing today. Its offer isn’t subject to due diligence and requires the acceptance of at least 50.1 percent of CPA shareholders, GPT said.
If GPT is successful, it would increase its external funds under management by selling five of CPA’s assets into its unlisted office fund, it said today. The value of office properties on its balance sheet would grow to A$ 5.7 billion from A$ 2.8 billion now, and the transaction would contribute as much as 40 basis points to GPT’s long-term return target of more than 9 percent, it said.
The bid doesn’t include any extra payment for management rights of CPA, Chief Executive Officer Michael Cameron told reporters on a call today. GPT will make a decision on the management of the fund once it has control of the fund, Michael O’Brien, group executive for corporate development at the company, said on the call.
Dexus separately offered A$ 41 million to take over CPA’s management.
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