CPP Investment Board

CPP Investment Board

December 24, 2010 00:35 ET

CPP Investment Board Announces Recommended Offer to Acquire ING Industrial Fund

TORONTO, ONTARIO--(Marketwire - Dec. 24, 2010) - CPP Investment Board (CPPIB) and three global investors (the Consortium) have made a cash offer to acquire 100% of the ordinary units (Units) in ING Industrial Fund (the Offer). An Implementation Agreement (the Implementation Agreement) has today been signed with ING Management Limited (IML) as responsible entity of the ING Industrial Fund (IIF).

Summary:

  • The Consortium, led by Goodman, consists of Canada Pension Plan Investment Board (CPPIB), All Pensions Group (APG) and China Investment Corporation (CIC);
  • Holders of Units will be offered $0.546 per Unit on a cum distribution basis (subject to adjustment as described below);
  • The Offer is proposed to be implemented by way of an informal trust scheme of arrangement, requiring IIF Unitholder approval (the Scheme); and
  • The Independent Directors of IML have unanimously recommended that IIF Unitholders vote in favour of the Scheme, in the absence of a superior proposal and subject to an independent expert concluding that the Scheme is in the best interests of IIF Unitholders.

Graeme Eadie, Senior Vice-President, Real Estate Investments, CPPIB, said: "This transaction is an opportunity for CPPIB to invest in a portfolio of high-quality industrial properties and represents our largest real estate investment in Australia. As a long-term and disciplined investor, we believe that these assets would be a good fit with our existing portfolio and is well-aligned with our real estate investment strategy."

The Offer

The Consortium is offering holders of Units who are registered at the record date, cash consideration of $0.546 per Unit on a cum distribution basis (i.e. the consideration will be reduced by any distributions, including the December 2010 quarter, paid or to which unitholders become entitled prior to closing).

The adjusted price post expected distributions of $0.53 per Unit represents:

  • A premium of 15% to the closing price of $0.46 on 27 October 2010, the day prior to the announcement that the Consortium had made an indicative proposal; and
  • A premium of 22% to the six month volume weighted average price prior to 27 October 2010 of $0.436.

The Offer is consistent with the Consortium's assessment of IIF's 31 December 2010 fair value NTA, based on independent third party valuations of the IIF portfolio and adjusted for IIF payments triggered on a change of control and sell-side costs.

The Consortium's assessment of IIF's 31 December 2010 fair value NTA incorporates an increase on the Australian portfolio and a decrease on the European portfolio. The latter is primarily driven by:

  • Required capital expenditure;
  • Market rental rates significantly below passing rentals on many assets; and
  • The largest Spanish asset being 49% vacant (WALE of 0.7 years).

The transaction is subject to various conditions precedent the most significant being:

  • Approval by IIF Unitholders;
  • Judicial advice in relation to the Scheme; and
  • Other regulatory approvals.

The Implementation Agreement contains customary exclusivity provisions in favour of the Consortium including 'no talk', 'no shop', and 'no due diligence' as well as break fee provisions of 1% of equity value ($14 million). The Consortium has also agreed to the payment of a reverse break fee of $25 million in certain limited circumstances.

Goodman Trust Australia

If the Scheme is approved, the Consortium will acquire the Units through a newly established investment vehicle, Goodman Trust Australia (GTA). GTA will be an unlisted, special purpose investment vehicle with a mandate to hold the IIF portfolio and enhance it by developing IIF's existing development pipeline. 

GTA will be owned by the Consortium, comprising Goodman holding a 19.9% share, CPPIB holding 42.5%, APG holding 25.2% and CIC holding 12.4%.

All the Consortium members have entered into commitments to fund GTA to effect the acquisition of IIF (subject to the termination provisions contained in the Implementation Agreement).

The Consortium has also obtained commitment letters from a syndicate of banks for a new $1.1 billion Australian debt facility. This facility is available to repay the existing IIF Australian syndicated facility and provides the capability to repay the IIF exchangeable notes.

Goodman will be appointed as the manager of GTA on terms consistent with its other managed funds.

Impact on Goodman

The transaction represents an expansion of Goodman's relationship with CPPIB, APG and CIC and provides additional assets under management of $2.6 billion.

In the event that IIF Unitholders approve the Scheme, Goodman will pay ING Groep N.V. $22.5 million to facilitate the smooth transition of the management of IIF to Goodman.

Goodman will also contribute $184 million to acquire its 19.9% stake in GTA (this contribution being net of the consideration Goodman will receive under the Scheme for its existing holding of Units). The aggregate contribution of $206 million will be funded from existing cash liquidity.

Explanatory memorandum and IIF Unitholder meeting

IIF Unitholders will be invited to vote on the Scheme at a meeting expected to be held in mid-March 2011. An Explanatory Memorandum (including a Notice of Meeting and an independent expert's report) is expected to be sent to IIF Unitholders in mid-February 2011. If the Scheme is approved, it is expected that it will be completed by the end of March 2011.

A copy of the executed Implementation Agreement entered into by IML and GTA is attached to this announcement.

Macquarie Capital Advisers is acting as financial adviser, and Allens Arthur Robinson is acting as legal adviser, to the Consortium.

All figures in AUD unless otherwise stated.

About Canada Pension Plan Investment Board

The Canada Pension Plan Investment Board (CPPIB) is a professional investment management organization that invests the funds not needed by the Canada Pension Plan (CPP) to pay current benefits on behalf of 17 million Canadian contributors and beneficiaries. In order to build a diversified portfolio of CPP assets, the CPPIB invests in public equities, private equities, real estate, inflation-linked bonds, infrastructure and fixed income instruments. Headquartered in Toronto, with offices in London and Hong Kong, the CPPIB is governed and managed independently of the Canada Pension Plan and at arm's length from governments. At September 30 2010, the CPP Fund totalled C$138.6 billion of which C$4.2 billion is invested in private equity funds, infrastructure and real estate assets in the Asia Pacific region. 

For more information about the CPPIB, please visit www.cppib.ca

About Goodman

Goodman Group is an integrated property group with operations throughout Australia, New Zealand, Asia, Europe and the United Kingdom. Goodman Group, comprised of the stapled entities Goodman Limited and Goodman Industrial Trust, is the largest industrial property group listed on the Australian Securities Exchange and one of the largest listed specialist fund managers of industrial property and business space globally.

Goodman's global property expertise, integrated own+develop+manage customer service offering and significant fund management platform ensures it creates innovative property solutions that meet the individual requirements of its customers, while seeking to deliver long-term returns for investors.

For more information about Goodman, please visit www.goodman.com.

About APG

All Pensions Group (APG) is the manager of APG Strategic Real Estate Pool (the Pool). The Pool is a pooled investment vehicle established in the Netherlands, in which investments, in both Australia and other countries, are held for the purpose of collective investment. With assets under management of approximately €265 billion (as at 30 September 2010) APG is one of the world's largest institutional investors.

For more information about APG, please visit www.apg.nl

About CIC

China Investment Corporation (CIC) is an investment institution established under the Company Law of the People's Republic of China on September 2007. It seeks stable and long term risk adjusted financial return and it is operated strictly on a commercial basis.

For more information please visit www.china-inv.cn/cicen/.

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