Dexus sweetens Investa Office Fund offer

Just days after losing a court battle to prevent the fund's majority shareholder from voting against its proposed takeover, the Australian real estate company has upped the ante with improved economic terms for shareholders.

Dexus Property Group's proposed takeover of the $2.5 billion Investa Office Fund (IOF), the last piece remaining to be exited in the long-running sale of the Australian real estate Investa platform, has been improved with a special A$0.7 (€0.47; $0.50) distribution from the IOF – on the condition shareholders accept its offer of cash and shares.

The Sydney-based firm made an initial offer in late December 2015 of A$0.42 Dexus securities and A$0.82 in cash per share, valuing IOF shares at A$4.19.

With the additional distribution, shareholders would receive a total consideration of A$4.24 per share at the last Dexus share price of A$7.90.

As a result, the planned meeting for April 8 to vote on the offer has been postponed while an amended offer document is sent to shareholders.

The special distribution has been made possible after Dexus said transaction costs associated with its takeover bid will be around $19 million lower than expected, primarily due to a reduction in costs associated with financing arrangements.

The move to improve the offer comes just days after Dexus lost a NSW Supreme Court battle with Morgan Stanley, IOF's largest shareholder. The court ruled that Morgan Stanley should not be precluded from voting on Dexus' takeover.

The court decision is seen as critical as Dexus requires at least 75 percent approval from IOF shareholders and Morgan Stanley, which owns 9 percent of the IOF, is understood to vote 'no' on the bid.

Dexus had last week asked Australia’s Takeovers Panel to intervene in the takeover and prevent Morgan Stanley from voting. The Takeovers Panel said it received the application from Dexus but no decision has yet been made as to whether to conduct proceedings.

Further complicating matters are reports of a Chinese sovereign wealth fund China Investment Corporation (CIC)-led consortium plotting a counter-offer for the IOF. According to multiple reports in the Australian press, CIC together with the listed Australian developer Mirvac and the private equity real estate giant The Blackstone Group is said to be jointly bidding for the listed vehicle that owns 22 properties across the country. Blackstone declined to comment on the rumored deal when approached by PERE.

The sale of the Investa platform by Morgan Stanley Real Estate Investing has been ongoing over the past year. The major part of the platform – the prime office portfolio called the Investa Property Trust – was acquired by CIC for A$2.45 billion in July last year, which went on to appoint Mirvac as the asset manager for the portfolio in December. Investa Land, another division of Investa, was acquired by Proprium Capital Partners reportedly for $340 million.