Morgan Stanley’s exit from the $8.9 billion real estate giant Investa Group looks set to end in high drama, with Dexus’s $2.5bn bid for Investa Office Fund expected to draw a competing offer in the next two weeks.
The surprise takeover approach comes as Mirvac signs up China’s sovereign wealth fund, China Investment Corp, to its nascent funds management business, in a deal that was revealed yesterday by DataRoom online.
According to sources, however, a fresh bid may be in the offing from Investa’s unlisted fund ICPF, which had been in the midst of negotiations to acquire the management platform for the two funds.
The vehicle, which owns stakes in some of Australia’s most recognisable skyscrapers, including Deutsche Bank Place, is largely controlled by superannuation funds, in addition to the Dutch investment giant, PGGM.
While they had agreed to buy the platform, sources argued the investors would have little trouble drumming up close to $2.5 billion in cash to trump Dexus’ offer.
The fast-paced developments in this final phase of the Investa sales process, which Morgan Stanley initiated back in February, follow a hiatus in negotiations that wore on for weeks as ICPF and IOF danced around the prospect of a jointly backed internalisation bid.
But while the US bank had thrown its weight behind ICPF’s efforts to acquire Investa Office Management, as the platform is known, the wholesale vehicle was unable to reach common ground with its listed stablemate.
Instead IOF has endorsed a part-scrip, part-cash bid from Dexus, in a controversial move that has divided the vehicle’s investors and will result in the dismantling of the property empire if it gains sufficient investor approval.
While it is understood Morgan Stanley does not support the offer, its status as a responsible entity means it is unable to cast a vote against the deal.
Morgan Stanley owns close to 9 per cent of IOF.
It faces the prospect of owning Dexus scrip if unit holders green light the transaction.
However, many in the market are now braced for an alternative offer.
If one is lobbed within the next two weeks, Dexus will forego its $23.5 million break fee on the IOF tilt.
ICPF is the logical candidate to pitch in a counter-bid although it must muster support from its wide base of institutional investors that recently voted to internalise the fund’s management.
A rival offer would also break new ground in the Australian property sector, with an unlisted fund venturing into a takeover arena on the listed markets.
This article first appeared in The Australian Business Review.