Takeover for Australian Unity-run fund scuttled
The $495 million takeover by Charter Hall and Abacus of the Australian Unity Office Fund has been torpedoed by a minority of investors including the Scanlon family-backed investment house, Hume Partners.
Unitholders in the fund – amounting to just over 37 per cent of those voting – voted against the takeover proposal, rejecting the recommendations of their fund’s independent directors and an independent expert in favour of the $3.04 cash bid.
More than 62 per cent of the those voting approved the takeover by way of a scheme agreement. While that vote achieved a sufficient majority to endorse the deal, a second critical motion – also backed by more than 62 per cent – to amend the property fund’s constitution required a higher level of support, of more than 75 per cent.
Without the requisite majority, the takeover was effectively scuppered.
As the prospect of a cash-out headed over the horizon, investors reacted quickly. The stock touched a six-month low of $2.72 during the day before closing 10¢, or 3.4 per cent, down at $2.84.
A terse statement from the bidding consortium – led by Steven Sewell, managing director of Abacus and David Harrison, managing director at Charter Hall – summarised the situation in their view.
“It is disappointing that, despite over 60 per cent of eligible votes cast being in favour of the resolutions, the scheme will not proceed and AOF unitholders have lost the opportunity to receive $3.04 per unit cash consideration.”
Publicly listed a little more than three years ago, the fund controls a $670 million portfolio of nine office towers around the country.
The seemingly straightforward deal began to unravel after one of the fund’s major shareholders Hume Partners began increasing its stake in October. Hume’s stake rose to 11.4 per cent ahead of the vote, enough – along with others investors – to stymie the takeover, especially when significantly less than the entire register votes.
Hume’s move came weeks after the fund’s board opened the door to the consortium for due diligence after it lifted its bid from $2.95 to $3.04 in July.
Australian Unity itself, which holds valuable management rights to the fund, was forced to issue a denial that it was acting in concert with Hume Partners.
Prevented from voting its own 19.9 per cent share of the fund, the consortium divested its stake in late October, a tactic which would effectively increase the prospects of its bid receiving sufficient approval from shareholders by diluting potential opposition from Hume and other shareholders.
That move drew the attention of the Australian Securities and Investments Commission which lodged a complaint with the Takeovers Panel just days before the shareholder vote on Monday.
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