Centuria trumps bid for GPT office fund with $316m merger proposal

25 May 2016

Publication: Australian Financial Review (print)

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Date: 25 May 2016
Author: Nick Lenaghan

Centuria has launched a $316 million proposal to merge the listed suburban office fund it manages, Centuria Metropolitan REIT, with its $300 million peer, GPT Metro Office Fund.

The merger bid – at an implied value of $2.46 – trumps an existing bid for the GPT fund by Growthpoint Properties Australia, which had won favour from the board with a $2.41 bid.

The hotly-anticipated cash-and-scrip merger offer comes as Centuria and its suburban fund increased their hold on the GPT fund’s register from 15.2 per cent to 16.1 per cent.

Centuria established a bridgehead on the register after a lightning raid last week, buying up stock from several institutional shareholders.

Its holding is now effectively a blocking stake to any counter proposals, on a register with a large retail holder base.

Centuria’s proposal is also the interloper offer that could trigger a bidding war, as Growthpoint Properties Australia is already midway through an exclusive due diligence period on the GPT fund.

Growthpoint, which is led by Tim Collyer, had not amassed a stake before launching its offer and it would not usually be possible to do so during a due diligence period. Backed by powerful South African investors, including its Johannesburg-listed parent – Growthpoint Properties with a 65.5 per cent stake, Growthpoint Properties Australia had previously sweetened its offer from $295 million to $310 million. The GPT fund’s board had said it would recommend the Growthpoint offer, in the absence of a superior bid.

The board is now considering the Centuria offer and said it would update the market subsequently.

The rival bid comprises one Centuria Metropolitan REITshare for each unit of the GPT fund as well as a total cash payment of 27¢. Centuria Capital, its listed parent, will contribute 4¢ to the cash total.

“We strongly believe that the Centuria proposal is superior to the Growthpoint Properties Australia proposal for GPT Metro Office Fund unitholders,” Centuria said. In addition to the higher implied price, Centuria said its offer was better because the merged vehicle would have a lower gearing than a merger with Growthpoint. The merged vehicle would have an $850 million portfolio and a market cap of about $550 million.

Shareholders in the GPT fund would end up with a 93 per cent exposure to suburban office assets in a merger with the Centuria fund. Growthpoint by contrast has a big weighting to industrial properties of about 40 per cent.

Another potential sweetener for unitholders is Centuria ‘s pledge to cut management fees for the GPT fund, from 0.60 per cent annually to 0.55 per cent, in line with the fees charged for managing the Centuria fund.

Centuria Capital‘s listed real estate business is led by the well-regarded Nicholas Collishaw, a property veteran who previously headed Mirvac.

Centuria is advised by Moelis, while the GPT fund is taking advice from UBS, which has already pushed Growthpoint to improve its bid by 4.1 per cent.

Pressing its bid strongly, Centuria said it could complete a due diligence within 15 days.