A day after issuing a small earnings upgrade, Dexus (DXS) has counter-attacked in the battle for control of the Commonwealth Property Office Fund (CPA) with an offer higher than the first and above that from rival GPT.
Although there is no chance of the battle for control of CPA reaching the current absurd heights seen in the bidding war for Warrnambool Cheese and Butter, the new bid from Dexus and its Canadian partner suggests all three groups and their advisors will have a busy and lucrative Christmas/New Year break.
And market analysts and brokers expect GPT to produce a second and higher offer in the next few days.
On Tuesday Dexus boosted its 2014 earnings guidance (for the year to next June) to 8.29c per stapled security, from 8.15c per security – up 7% on 2013’s result.
Dexus said it will distribute 3.07c per security for the six months ending December 31, 2013 – up 6.2% on the prior corresponding period.
The company said it was aiming to pay a full year distribution of 6.24c per security.
With analysts tipping a counter offer for the Fund to top that from GPT, the market went on alert after that announcement and Dexus duly obliged yesterday with sweetened terms.
DXS Vs GPT Vs CPA YTD – The battle for CPA heats up as Dexus lobs a new bid
Under the new bid, Dexus and its joint venture partner, the Canada Pension Plan Investment Board, will offer shares and cash equal to $1.27 a CPA share in an unconditional bid.
The Dexus offer comprises a cash payment equal to 77.45c and 0.4516 of a Dexus stapled security.
Based on the Dexus closing price on December 10, the offer values each CPA unit at $1.27 (a 2.6% premium to the GPT Group’s offer on a comparable basis).
At the close yesterday Dexus units eased half a cent to $1.010, GPT units were down slightly at $3.39 and CPA units were up 2% to $1.275, thanks to the new, higher offer from Dexus.
That’s 3c higher than the first Dexus offer and now higher than GPT’s, given the recent fall in GPT’s share price. GPT’s offer price is effectively around $1.24.
And the offer has been changed from a scheme of arrangement to an indicative off-market takeover with no minimum acceptance, making it far easier to sell to unitholders and complete.
Dexus said it will now re-enter into discussions with CPA’s independent manager, Commonwealth Investment Management Ltd, (CMIL), for the new offer.
GPT’s current bid is an off-market takeover with 50.1% minimum acceptance.
Dexus will also now exercise its option over 14.9% of CPA, equal to 35 million units.
The bidding war now sees CPA valued at $4 billion, which is is nearly eight times the value of the current top bid for control of Warrnambool.
CPA unitholders will be entitled to receive and retain the 3.5c CPA interim distribution, and any other distribution paid by CPA’s independent manager CMIL to CPA unitholders, during the Dexus offer period, will be deducted from the cash consideration payable under the Dexus offer.
In a media release, CMIL said CPA unitholders are not required to act at this time.
”CMIL will make further announcements in due course regarding both the DEXUS Offer and also the off-market takeover offer which was received from GPT.
"No action is required by CPA unitholders in relation to either offer at this time."
Now it’s up to GPT to make a higher offer.
Brokers said that with another open bid still on the table from GPT, it is unlikely investors will accept the current bid for CPA. CPA has just opened and is trading at terms.
”We expect GPT to come over the top. 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,” Moelis & Co analysts said in a note to clients yesterday afternoon. ”We do not think there is a risk of the bids not being accepted and CPA’s management internalised.”
