GPT Group is likely to turn its attention to another target after this week striking a deal to carve off nearly $1.2 billion of property in the battle for Commonwealth Property Office Fund, according to market sources.
There was speculation yesterday the $1.97 billion Investa Office Fund would be a good fit for GPT with IOF shares closing up 8 cents to $3.21 in trading yesterday.
On Monday night, Dexus Property Group and partner Canada Pension Plan Investment Board and rival GPT announced GPT could buy four Commonwealth Property Office Fund (CPA) office towers for $679 million if Dexus wins its $3 billion takeover bid for the office landlord. CPPIB may also sell its half-share in Northland shopping centre in Melbourne to GPT for $505 million. The properties would be owned by GPT's wholesale office and shopping centre funds.
Under the revised offer, Dexus and CPPIB have put more cash on the table, and lowered the script component of their bid.
Winston Sammut, managing director of fund manager Maxim Asset Management, said the deal saved face for both sides with GPT getting some assets and Dexus/CPPIB the grand prize.
He noted that the bid price for CPA was becoming expensive, being in line with CPA's share price of $1.23 and above its net tangible assets of $1.19.
"GPT has the capacity to spend more and brokers today have raised Investa as a potential target, though not immediately," Mr Sammut said.
He did note that investment bankers might be "talking their own book". Investa Office Fund had been trading at a 5 to 10 per cent discount to its $3.25 NTA over the past month, he said.
Phoenix Portfolios managing director Stuart Cartledge said both Dexus and GPT shares had traded up yesterday following the announcement, while CPA shares were flat, reflecting that the market was no longer prepared to pay a premium for CPA on the expectation of a higher bid.
"Two days ago I would have expected a higher bid, but Dexus has put GPT in a difficult place," Mr Cartledge said.
If GPT were to increase its bid, it risked paying too much, while it would also lose Northland as the acquisition was subject to Dexus winning CPA, he said.
CLSA analyst John Kim said a higher bid from GPT should not be ruled out. GPT had still been accumulating shares in CPA and announced on Monday it had increased its stake to 11.4 per cent, nor had it formally withdrawn its offer, he said.
GPT said on Monday that its bid for CPA remained open until January 24, while Dexus's offer closes on February 7.
Mr Kim said GPT's announcement on Monday was more likely driven by its fiduciary duty as manager of its two wholesale funds, which will buy the office towers and shopping centre.
GPT last year withdrew from a number a takeover tilts, with the group bidding on Australand's office and industrial division for $2.94 billion.
It was also reported to have made an offer for Lend Lease's unlisted industrial fund. The bid for CPA is GPT's third attempt to grow its assets.
In October, GPT chief executive Michael Cameron said he wanted to increase the group's funds under management by $10 billion, but did not set a timeframe, saying the key target was a minimum 9 per cent annual growth in total return.
In October, Dexus teamed up with CPPIB, one of the world's largest pension funds, to launch an initial $2.7 billion hostile takeover bid for CPA.
The following month, GPT pitched its surprise cash-and-scrip play.