Cromwell Group has thrown the DEXUS offer for Investa Office Find into a spin with the purchase of a strategic 9.83 per cent stake in the listed fund only hours before proxies submissions close.
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It was suggested by analysts that the deal had effectively scuttled the DEXUS play. It now depends on whether Cromwell makes a new offer, probably with a partner, or even with the Investa manager.
It was understood the seller was CBRE International which had been a supporter of the DEXUS cash and scrip offer.
Cromwell bought the 60 million IOF units at a high price of $4.24 on a T+1 basis and now has a seat at the negotiation table. The group, run by Paul Weightman, is no stranger to Investa having been part of an international consortium last year that looked at the Investa platform.
"The acquisition, which was funded by a combination of debt and equity, is consistent with Cromwell's stated strategy in its first half 2016 results announcement to be ready to capitalise when the right opportunities present themselves," Mr Weightman said.
DEXUS, run by Darren Steinberg, needs 75 per cent of IOF units to gain control and has offered now 0.4240 DEXUS securities plus 82.29¢ in cash, plus a 7¢ distribution.
Following the Cromwell purchase, DEXUS units rose 14¢ to $8.04. This values IOF at about $4.30 per unit based at current DEXUS share price.
IOF unitholders meet this Friday in Sydney to vote. A No vote will see the retention of the current manager, Investa Office Management, led by Jonathan Callaghan.
But analysts said its unlikely Cromwell will vote for the DEXUS offer, and neither will the other main shareholder, Morgan Stanley with 8.9 per cent, leaving Mr Steinberg with a tough fight on his hands to win control of the listed Investa Office Fund.
Macquarie Equities said it is unclear if other partners are involved with Cromwell and its broader strategy, which could deliver third party fees. Another investor, Redefine, has also been a key investor for some time at both the "headstock and direct asset level with Cromwell".
DEXUS' woes were compounded by a broker survey showing sentiment is shifting towards maintaining the current manager of IOF.
The independent broker CLSA conducted a proprietary investor survey which indicated that 38 per cent of respondents indicated they would vote NO, but the survey has several limitations.
"Post the recent events and disclosures, our discussions with investors indicate 19.5 per cent will vote NO. We like choice and the merits offered under Investa's proposal, but continue to believe there are downside risks with a NO vote and absent a superior cash bid, on current pricing the DXS proposal looks attractive at a 6.6 per cent premium to net tangible assets," the CLSA report says.
In DEXUS' favour, the Independent Board Committee of IOF, has recommended the DEXUS offer, in the absence of a superior offer, as has the independent expert KPMG.
All major proxy advisors, ISS Governance, CGI Glass Lewis and Ownership Matters, have also supported the DEXUS bid.
Another, smaller shareholder, Deutsche Asset management, has also supported the DEUXS proposal, saying it continues to believe that the DEXUS proposal is in the best interests of IOF shareholders.
"The alternative -do nothing- proposal is in our opinion, suboptimal, conflicted and with no chief executive yet identified," Deutsche Asset Management said.
