Battle for Investa Office Fund gets hotter

Battle for Investa Office Fund gets hotter

21 September 2018

Canada’s Oxford Properties Group has roared back the fight for Investa Office Fund (IOF) by trumping its rival Blackstone’s bid by 8 cents a share, reports the AFR.

But the takeover battle for IOF is showing no signs of slowing, as Blackstone confirmed it could yet outbid its rival.

Oxford tipped an extra $48 million into their bid taking it to $5.60 cash per share, 10 cents better than its last bid and 8 cents above Blackstone’s own revised bid of $5.52.

Boosting their cause, the Canadians have a structured agreement to acquire the stake held by IOF’s largest investor, the unlisted Investa Commercial Property Fund, which is near 20 per cent.

Oxford’s latest bid came just three working days before IOF investors were due to vote on the current Blackstone offer, which the Americans had been forced to sweeten after Oxford entered the fray.

An IOF unitholder meeting set down for Monday, September 17 to vote on the Blackstone offer was adjourned.

It’s the second time the meeting has been adjourned at short notice as Blackstone and Oxford, which is the real estate arm of giant Canadian pension funds OMERS, trade bids in a battle for supremacy.

The Canadians have dropped several key conditions from their latest offer in an effort to get the board to engage with it and adjourn the shareholder meeting on Monday.

The Canadians can direct the voting rights for the first half of that, of almost 10 per cent.

That stake, along with the potential for ICPF to also direct its vote from the remaining 10 per cent against Blackstone, will be a factor in the IOF board’s considerations.

IOF has an independent board to decide on such takeover recommendations because the fund’s management is not owned by all of its shareholders and this can create perceived conflicts of interest.

The board will give Oxford four weeks of due diligence, with access to at least the same information as Blackstone received.

While Blackstone said it was open to discussions to keep Investa’s manager on after a takeover, many believe Blackstone would seek to break up the portfolio of properties instead, leaving the manager with nothing to manage.

Oxford Properties appears as if it will keep the manager on as it is unlikely to break up the portfolio of office towers once it takes control.

The IOF board, led by Richard Longes, said it will engage with Oxford “to determine whether the Oxford Indicative Proposal can become a binding proposal capable of acceptance”.

The board will work with Oxford “on an expedited timetable” as it moves through due diligence, it said.

One observer, who declined to be named, told the Sydney Morning Herald: ”It’s hardly a knockout blow,” but with the ICPF stake ”it will be harder for Blackstone to come back”.

Oxford, which is viewing the $3.65 billion IOF as a launching pad into the buoyant Australian office market, said it had conducted due diligence based on public information prior to submitting this indicative offer.

If successful, the Investa purchase will give Oxford an immediate large slice of the Australian office market which includes interest in buildings such as 126 Phillip Street and 388 George Street, Sydney and 120 Collins Street, 737 Bourke Street, Melbourne. ICFP is also developing 60 Martin Place, Sydney.

The battle for the Investa platform has been raging since 2007 when Morgan Stanley’s real estate arm bought the business in a combination of about $4.5 billion of debt and about $2 billion of equity.