SYDNEY, Nov 11: The Canada Pension Plan Investment Board and Dexus Property have won a recommendation from an arm of Commonwealth Bank of Australia for their sweetened A$2.8 billion ($2.6 billion) offer for the bank’s office trust.
The bid for Commonwealth Property Office Fund (CPA) was recommended by Commonwealth Managed Investments Limited, a wholly owned subsidiary of Commonwealth Bank that manages the fund on behalf of unit holders. It comes amid growing interest from international investors in Australia’s property and infrastructure markets.
CPA would offer the Canada Pension Plan Investment Board (CPPIB), one of the world’s largest pension funds, a bigger foothold in Australia and increase Dexus Property Group’s office assets under management by almost 50 percent.
Under the revised proposal, Dexus and CPPIB are offering an estimated A$0.727 a unit in cash and A$0.4516 a unit in Dexus stapled securities.
The proposal offers CPA unit holders a price of A$1.21 a unit, up from a previous offer of A$1.159 a unit that valued CPA at A$2.7 billion. The earlier offer was rejected.
The recommended proposal from CPPIB and Dexus still needs to meet a number of conditions, including regulatory approval, review by an independent expert to see if it is in the best interests of CPA unit holders, and approval from CPA unit holders.
CPPIB and Dexus now have four weeks to do exclusive due diligence, with a binding agreement expected at the end. Dexus also proposed to pay A$41 million to Commonwealth Bank of Australia for the management rights of CPA and will now conduct due diligence.
Dexus already has a derivative contract granting it access to 14.9 percent of CPA.
CPA’s shares were 1 percent higher in early afternoon trading, Dexus was up 0.7 percent and Commonwealth Bank of Australia was down 1.2 percent, while the broader market was down 0.2 percent.
High yields combined with clear market regulations and strong export links to Asia, especially China, are putting Australia firmly on the radar for sovereign investors such as CPPIB.
Foreign investment in Australian property, including hotels, office space and retail malls, almost doubled year-on-year to A$39.4 billion last year, according to Jones Lang LaSalle.
($1 = 1.0668 Australian dollars)
(agencies)
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