The battle between two real estate heavyweights over one of Australia’s largest property companies has hit a critical turning point.
As part of an ongoing struggle to acquire the listed Australian office owner Investa Office Fund, Oxford Properties, the real estate arm of Canadian Ontario Municipal Employees Retirement System, has secured a binding deal to acquire a 9.99 percent stake of IOF securities.
Sydney-based IOF, one of the largest commercial real estate owners and managers in Australia, held 20 office assets with an average occupancy rate of 97 percent across the country and an aggregate value of A$4.4 billion ($3.2 billion; €2.7 billion) as of June 30, according to the firm.
The seller of the 9.99 percent will be Investa Commercial Property Fund, the management platform for IOF. The pact allows ICPF to sell a stake up to 19.9 percent of its stake to Oxford, if the Canadian firm acquires IOF.
The sale is conditional on shareholders not approving a scheme implementation agreement with Blackstone, IOF’s other main suitor. The New York-based investment firm had entered into the agreement on June 13 through which the private equity giant would acquire Sydney-based IOF for the price of A$3.30 billion, or A$5.52 a share.
A ‘no’ vote from ICPF against the Blackstone proposal therefore will make it very difficult for the New York-based investment firm to get the required 75 percent approval among shareholders to take over IOF, according to one source familiar with the sales process.
The C$101.15 billion ($78 billion; €66.8 billion) pension plan sweetened its bid two weeks ago for IOF to A$5.60 per share, after entering the race with a A$5.50 a share offer earlier this month and subsequently being outbid by Blackstone at A$5.52 a share. The Oxford bid successfully cancelled a meeting scheduled for last Monday where IPG shareholders were set to vote on Blackstone’s offer.
The board of Investa Property Group, IOF’s parent company, will now conduct due diligence on Oxford’s offer, which values IOF at A$3.35 billion, over the next four weeks, the source told PERE. Should that due diligence turn out fruitful, the IOF board will then ask the shareholders to vote on Oxford’s offer. If they reach a 75 percent majority in favor of a sale, the Canadian firm will be set for a full takeover of IOF.
Blackstone’s response last week was to send a letter to Investa Listed Funds Management Limited. In the letter, which was posted on the Australian Securities Exchange’s website, Blackstone reaffirmed its right to match or increase Oxford’s bid, should the pension plan reach a sales agreement with the ICPF board at the end of the due diligence process.
The firm’s statement came after Tony James, executive vice chairman of Blackstone, acknowledged likely defeat in a CNBC interview last Monday, following the cancellation of the IPG shareholder meeting. Oxford’s purchase of its IOF stake “gives them nearly a blocking position. So I think that leaves us out on this one,” James said on-air.
According to the source, Blackstone could potentially pursue an off-market takeover of the company. That would mean that the investment firm would try to get hold of 50 percent of the company through buying up shares, instead of seeking the 75 percent of shareholder approval for a complete takeover.
IOF has attracted multiple suitors over the past few years. Back in April 2017, the Brisbane-based real estate firm Cromwell Property Group proposed an all-cash offer of A$4.85 per share for IOF. Cromwell owned a 9.83 percent stake in IOF at the time. That offer did not get the required 75 percent approval among shareholders.
In April 2016, Sydney-based Dexus Property Group got its takeover proposal rejected by 60 percent of shareholders. One month earlier, Blackstone was bidding jointly with the Chinese sovereign wealth fund China Investment Corporation and the listed Australian developer Mirvac, according to multiple reports in the Australian press.
Then, in June this year, Blackstone singlehandedly made a bid that now, three months later, may still lead to the investment firm finishing second in the bout for the Australian office owner.