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Canadians roar back into Blackstone fight over Investa with $3.4b counterbid

September 14, 2018

A stake in Deutsche Bank Place is one of the trophy assets in the Investa Office Fund portfolio. Photo: Peter Rae

Nick Lenaghan and Matthew Cranston

Canada’s Oxford Properties Group has trumped its rival Blackstone with an improved bid for Investa Office Fund of near $3.4 billion, bolstering its second tilt with control over a 20 per cent stake in its takeover target.

The Canadians tipped an extra $48 million into their bid taking it to $5.60 cash per share, 10¢ better than its last bid and 8¢ above the US private equity giant’s own revised $5.52 bid.

Oxford, the real estate arm of Canadian pension fund OMERS, has been locked in a tight-fought contest with Blackstone for control of the Investa fund for weeks.

Its latest bid came just three working days before IOF investors were due to vote on the current Blackstone offer, which the Americans had been forced to sweeten after Oxford entered the fray.

The Canadians have dropped several key conditions from their latest offer in an effort to get the board to engage with it and adjourn the shareholder meeting on Monday.

Boosting their cause, the Canadians have a structured agreement to acquire the stake held by IOF’s largest investor, the unlisted Investa Commercial Property Fund, which is near 20 per cent.

The Canadians can direct the voting rights for the first half of that, of almost 10 per cent.

That stake, along with the potential for ICPF to also direct its vote from the remaining 10 per cent against Blackstone, will be a factor in the IOF board’s considerations.

Crucial factors

Oxford now has board approval from OMERS for its bid and has removed a financing condition that was contained in its first proposal.

“OMERS has sufficient equity available to it to fully fund the proposal and will fund the proposal using its own funds as required in addition to any third party financing it may arrange prior to completion,” Oxford said.

The Canadians still require due diligence on the Investa fund’s $4.4 portfolio of assets, which is weighted to the booming Sydney market with stakes in landmarks such as Deutsche Bank Place.

Oxford said it could strike an implementation agreement within four weeks of beginning due diligence.

But that period and then the time taken to execute a buyout could become crucial factors for investors as they weigh up the relative merits of a $5.60 offer from the Canadians against the $5.52 Blackstone offer which is on the table next Monday.

Blackstone, which is yet to signal its next move, will be hoping that the immediacy and certainty of its existing bid will be enough to sway the board and investors.

Oxford had agreed to buy almost half the ICPF stake already.

Legal advisers

Until completion of that acquisition, ICPF will exercise voting rights attaching to the 9.99 stake as directed by Oxford. The Canadians have a purchase agreement on the remainder of the ICPF holding.

Both acquisitions are now agreed at a $5.60 price, above the $5.25 strike price agreed when ICPF originally sold to Oxford in late August.

The bidding war has taken both offers well past IOF’s net tangible asset backing of $5.47 and well ahead of the $5.05 price at which Blackstone initially approached the Investa fund’s board.

The battle to take over the listed IOF has pitted one of the world’s largest private equity firms, New York-listed Blackstone, against one of Canada’s biggest pension funds.

It has also involved a considerable number of legal advisers, with lawyers from Ashurst and bankers from Morgan Stanley advising the Canadians while Blackstone is advised by UBS and lawyers Clayton Utz. The IOF board has JPMorgan and Allens on its side.

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