Dexus Consortium Set to Win the Bidding for CPA

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Wednesday, January 15th, 2014
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Dexus Property Group and the Canada Pension Plan Investment Board have emerged as the most likely winners of the bidding contest for the $3.8 billion Commonwealth Property Office Fund (CPA).

Their chief rival for CPA, GPT Group, announced that it had opted to withdraw from the running by ruling out an increase in its bid proposal or an extension of the offer once it expired on January 24.

GPT chief executive Michael Cameron said in an official statement that the group had conducted a careful assessment of the competing proposal before making the decision not to increase its off-market takeover offer.

The announcement of GPT’s decision to withdraw from the bidding coincided with the expiration of the pre-bid acceptances it had obtained from a trio of investors, including Morgan Stanley Investment Management, SG Hiscock & Company and Gruss Global Investors.

CPA is an ASX-listed real estate investment trust (REIT) which focuses on quality office buildings situated in the downtown areas or major suburbs of Australian cities. As of June 2013 the company had a portfolio of 25 office properties and total assets worth $3.8 billion.

The Dexus consortium first came forward with an offer for CPA of 67 cents cash and 0.4516 securities back in October, which at the time was equivalent to $1.15 per share.

On November 19 GPT launched a surprise off-market offer for all of CPA’s shares in exchange for 0.141 GPT shares and 75.3524 cents, which would be reduced to the extent of any distribution made on a CPA unit.

Dexus and the Canada Pension Plan Investment Board responded with an enhanced offer of $1.27 per CPA unit, including 0.4516 Dexus shares and a cash payment of 77.45 cents. The consortium also altered its proposal from a scheme arrangement requiring a 75 per cent level of acceptance to a full takeover bid without any minimum acceptance.

The Dexus consortium managed to obtain the backing of the Commonwealth Bank and the CPA board for its bidding proposal last month.

Dexus currently controls 25.4 per cent of CPA, while GPT holds an 11.7 per cent stake.

Some analysts have hailed the decision by GPT to toss in the towel as a positive outcome for the company, as it is in consonance with their strategic objective of growing their funds management platform, while also removing the risk of overpayment for assets.

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