Investa today released an Information Memorandum to IOF unitholders on the reasons why they should reject a proposal by DEXUS to acquire 100% of IOF
Investa Office Management (‘Investa’ or the ‘Platform’) today released an Information Memorandum to Investa Office Fund (IOF) unitholders detailing the reasons why they should reject a proposal by DEXUS to acquire 100% of IOF, saying the Proposal is opportunistic and does not fully value IOF.
DEXUS Proposal undervalues IOF
Investa CEO and Managing Director Jonathan Callaghan said the DEXUS Proposal does not offer the value that IOF unitholders should reasonably expect to receive in a change of control transaction.
The DEXUS proposal is 3.9% dilutive to NTA and heavily scrip-based, increasing uncertainty around the value IOF unitholders would receive for their units. Significant transaction costs of around $115 million also impact the value of DEXUS’ offer.
“The proposal provides little or no compensation for synergies, transaction cost savings, the potential valuation upside in IOF’s portfolio and large scrip-based component of the proposal, valuing IOF well below that which would be implied by recent AREIT transactions, Mr Callaghan said.
“Unitholders deserve a substantial premium and they are not receiving it with the DEXUS Proposal,” he said.
Investa alternative is compelling
Mr Callaghan said there were many compelling reasons IOF unitholders should remain under Investa management including:
> IOF has outperformed DEXUS by about 17% (total book value return between 1 July 2011 and 8 March 2016) since Investa assumed management of IOF in 2011, highlighting Investa’s strong management team and performance;
> IOF’s management fee structure is among the lowest of its Australian Real Estate Investment Trust (AREIT) peers and is aligned with its unit price performance;
> IOF will have the opportunity to acquire 50% of Investa if the DEXUS Proposal is rejected; and
> Investa provides a stable platform and best practice governance.
“It is important that IOF unitholders understand that the same governance arrangements which have underpinned IOF’s strong performance will continue to apply if they remain with Investa, including a majority independent IOF board, with an independent chairperson, all of whom have been approved by IOF unitholders.”
IOF will also continue to have a separate funds management team reporting to the independent board.
Opportunity to acquire 50% of Investa
Mr Callaghan said the opportunity for IOF to acquire 50% of the Platform in a joint venture with the Investa Commercial Property Fund (ICPF) -- owner of Investa -- would provide IOF with exposure to the financial performance of the Investa Platform and enable IOF unitholders to leverage the growth of the Platform.
The proposed 50:50 joint venture between IOF and ICPF builds on the significant alignment already in place between the funds, through co-owning $2 billion of properties.
Mr Callaghan said it was difficult to advance discussions with the IOF board in relation to an alternative proposal without triggering a substantial break-fee of around $23 million under the terms of the DEXUS Proposal.
“If the DEXUS Proposal is rejected, we are committed to immediately discussing the terms of the proposed JV with the IOF board.”
Strong market outlook underpins Investa vision for IOF
Mr Callaghan said there was inherent upside in IOF’s portfolio, and Investa, with its end-to-end platform, intimate knowledge of IOF assets and strong leasing and asset management capabilities, was very well placed to optimise IOF’s performance into the future.
“Investa has a clear vision for IOF – to continue delivering strong performance, offering a low-fee structure and a stable platform with best practice governance and alignment of interests. We are seeking to further integrate our relationship with IOF, which the joint venture will achieve.”
Read the 'Investa For IOF' Information Booklet