Dexus Merger a Potential Fly in the Ares Ointment for AMP

The idea has been floating around the market now for the past six months but yesterday Dexus finally revealed a proposal that could see AMP forced to alter or even abandon plans to sell a stake in its best asset AMP Capital to US investment group, Ares.

Dexus yesterday finally revealed a proposal to merge with a $5 billion wholesale property fund managed by AMP Capital.

The independent board of the AMP Capital Diversified Property Fund (ADPF) has already entered into an implementation agreement with the Dexus Wholesale Property Fund (DWPF) – so a merger is on the way.

If that is accepted by the securityholders of the fund, it could very well see AMP forced to revamp its proposed deal with Ares (securityholders in both funds have to approve the merger with a 50% vote for the Dexus holders and a 75% vote for the AMP Fund holders)

AMP Capital on Tuesday acknowledged the independent board’s decision to merge but said it would continue its discussions with Ares regarding a joint venture for AMP Capital’s private markets business which includes its real estate management arm.

Dexus CEO Darren Steinberg said in Tuesday’s statement: “We are pleased to be able to make progress that will enable this merger to be voted on by both sets of Unitholders.

“This merger delivers further economies of scale from a management, procurement and leasing perspective across the platform and is strongly aligned with our objective of being the wholesale partner of choice.”

“If the merger is approved, it will expand and diversify Dexus’s funds management business. In addition, it will diversify DWPF’s existing wholesale institutional investor base through the introduction of new investors, while expanding existing relationships already established within Dexus’s funds management platform.”

The AMP managed fund is diversified property fund that invests in the office, retail and industrial sectors.

Dexus said the overall sector allocation and portfolio quality is comparable to the its wholesale fund’s portfolio.

“The portfolio includes investments in assets such as Quay Quarter Tower, Sydney (50% interest) which is currently under construction, 309-321 Kent Street, Sydney (50% interest, with remaining 50% co-owned by Dexus), Westfield Booragoon, Perth (50% interest) and Westfield Warringah Mall, Brookvale, Sydney (25% interest) along with a diversified portfolio of industrial assets.”

ADPF also has minority investments in two other AMP Capital managed wholesale property funds.

Dexus said that once all the votes had been taken “further details confirming Dexus’s contribution and expected returns to Dexus will be provided.”

Dexus has assets with around $32 billion, so the AMP deal would lift that by around 15%.

No values were provided in the statement.


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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