Battle royale erupts as GPT launch surprise $3 billion takeover bid for Commonwealth Property Office Fund

A battle royale has erupted over the $4 billion Commonwealth Property Office Fund after GPT surprised the market yesterday with $3 billion rival takeover offer.

The offer gazumps the Dexus consortium takeover offer by about $160 million, which is valued at about $2.84 billion.

GPT is offering $O.75325 in cash and 0.141 GPT security for every Commonwealth Property Office Fund (CPA) unit. Based on GPT's closing price on 18 November, the offer values CPA units at $1.272. 

The Dexus and Canadian Pension Fund offer is valued at $1.219 per unit. 

However, Credit Suisse analysts pointed out today that excluding CPA's 1H2014 dividend of 3.32c, the adjusted price is actually $1.24. 

The analysts also believe that it will be difficult for the Dexus consortium to match the GPT offer.  One reason was based on its estimates that "if DXS were to match GPT’s offer by increasing the cash offer by 2.7¢ to 73.7¢, implying a total bid price of $1.24, this would see EPS accretion (FY15) reduce to ~1.3–1.8% as compared to the guidance of 2–2.5%".

On that basis, net tangible asset dilution would increase from 1.9% to 2.7%, they said.  "As a result, we see limited scope for DXS-CPPIB to justify any further premium".

"We also believe the increased offer from GPT potentially provides DXS with additional incentive to walk away as it would allow DXS to crystalise a 12.4% return on its entry price of $1.13 for its 14.9% stake in CPA.”

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