This was published 8 years ago
Investa battle draws to a close
By this time next week, pending last minute hiccups, the destiny of the listed Investa Office Fund (IOF) will have been decided.
Unitholders meet on Friday, April 15, to decide whether to vote yes to the DEXUS cash and scrip offer, or vote no, which will retain the current manager, Jonathan Callaghan's Investa Office Management team, formerly the Investa Commercial Property Fund.
Investa has taken a 75 per cent stake in 420 George Street, Sydney.Credit: Tyrone Branigan
The battle has been one of the longest in the real estate investment trust sector for many years.
At stake is a high calibre office portfolio worth $2.5 billion and includes assets such as Deutsche Place, at 126 Phillip Street, Sydney. Investa also paid $422.5 million for a 75 per cent stake in 420 George Street, Sydney.
It is the only Australia-focused office REIT. If DEXUS is successful it will create a $24 billion office-focused REIT, which will dwarf its peers.
DEXUS will increase its share of the national office market to about 7.4 per cent from 2.6 per cent in 2009, or about $17.5 billion. In Sydney it would command about 11 per cent of the premium-grade office skyscrapers.
It all started back in January 2015 when Morgan Stanley said it was looking to exit the whole Investa platform. The process was in three tranches, with the stoush over the listed office fund, the final piece.
The former managers of IOF asked to be included in the process to internalise the management but were rejected by Morgan Stanley.
After months of turmoil and uncertainty, IOF's management formed an independent board committee led by Deborah Page, to undertake a strategic review as to the best course for the fund's future.
This was amid Morgan Stanley selling the direct Investa assets to the Chinese Investment Corp, for $2.5 billion, which in turn appointed Mirvac to run, and the Investa Land component.
That left Morgan Stanley with the management of IOF, which is sold to Investa Office Management and a direct stake of 8.9 per cent.
Following the strategic review, IOF's IBC approached DEXUS, and in late December the cash/scrip takeover was made.
But that is also when the acrimony started.
Most long takeovers end in being, what can be best described as a very long tennis match.
One side serves, in the form of a sweetened offer, as a special dividend from IOF, then other side fires back a fierce volley, in the form of a rejection.
And so it goes, until a winning shot is made.
At this stage, it seems DEXUS has the advantage, but Mr Callaghan's Investa Office, is not giving up.
Despite the higher cash offering from DEXUS, IOM still says it undervalues the business.
One major sticking point is whether Morgan Stanley can vote with its direct stake. DEXUS and IOF have applied to the Takeovers panel for a ruling on this and other issues. However the NSW Supreme Court determined that Morgan Stanley can vote.
Proxy advisory firms are behind the DEXUS offer, saying it's a "compelling" offer for IOF unitholders.
Michael Scott, from CLSA, says he likes the extra cash of 7¢, but questions where it's coming from and also the timing, almost one week out from the unitholder vote.
"Nevertheless, cash is king and the implied premium to net tangible assets inclusive of the conditional DEXUS proposal becoming effective increases to 6.2 per cent from 4.4 per cent," Mr Scott says.
The coming week will no doubt be full of action in the lead-up to the vote.