CPP Investment Board

CPP Investment Board
DEXUS Property Group

DEXUS Property Group

November 10, 2013 16:57 ET

Recommended Proposal to Acquire Commonwealth Property Office Fund

TORONTO, ONTARIO--(Marketwired - Nov. 10, 2013) - Canada Pension Plan Investment Board issued a joint ASX release with DEXUS Property Group today. Below follows the release.

Recommended proposal to acquire Commonwealth Property Office Fund

DEXUS Property Group ("DEXUS") refers to its announcement on 11 October 2013 in relation to the indicative, non-binding proposal (the "Proposal") made jointly with Canada Pension Plan Investment Board ("CPPIB") (together the "Consortium") to Commonwealth Managed Investments Limited ("CMIL") the Responsible Entity of the Commonwealth Property Office Fund ("CPA") to acquire all of the issued units in CPA1.

DEXUS today announced that:

  1. The Consortium has revised its Proposal put forward on 11 October 2013 in the manner described below - which the Independent Directors of CMIL have confirmed they will recommend, in the absence of a superior proposal and subject to an independent expert opinion that the proposal is in the best interests of CPA Unitholders ("Recommended Proposal")
  2. The Consortium has entered into a Process Agreement ("Process Agreement") with CMIL in relation to progressing the Recommended Proposal, and
  3. It has entered into a Confidentiality and Exclusivity Agreement with the Commonwealth Bank of Australia ("CBA") with respect to an ancillary proposal.

Summary of the Recommended Proposal

The Recommended Proposal provides for the following cash and DEXUS scrip consideration (expressed per CPA Unit):

  • A cash payment equal to 71 cents plus an amount equivalent to 75% of FFO per CPA Unit for the period from 1 January 2014 to the Implementation Date, plus
  • 0.4516 DEXUS stapled securities.

CPA's current distribution guidance of 6.65 cents per CPA Unit for the year ending 30 June 2014 assumes a payout ratio of 75% of FFO. Based on an assumed implementation date of 31 March 2014, the total cash consideration component of the Recommended Proposal is estimated to be 72.65 cents per CPA Unit. The actual total cash payment may be higher or lower than 72.65 cents per CPA Unit, depending on the operating performance of CPA and the actual implementation date.

CPA Unitholders will be entitled to receive and retain the CPA distribution for the six months ending 31 December 2013, which is expected to be approximately 3.3 cents per CPA Unit. If the Recommended Proposal is implemented, this will be the final distribution paid by CPA to CPA Unitholders.

DEXUS stapled securities issued to CPA Unitholders under the Recommended Proposal will have a pro-rata entitlement to DEXUS distributions for the period to 30 June 2014 from the date of issue of the DEXUS stapled securities under the Recommended Proposal, and will rank equally with all other DEXUS stapled securities for subsequent distribution periods.

The pro-forma earnings and NTA impact of the Recommended Proposal on DEXUS's key financial metrics is expected to remain within the ranges provided in the announcement of the initial Proposal on 11 October 2013 (adjusting for the change in the assumed implementation date from 31 December 2013 to 31 March 2014 and the announced CPA property revaluation2). DEXUS will provide financial forecasts in conjunction with the release of a Scheme booklet following execution of a binding Implementation Agreement between DEXUS and CMIL.

Estimated consideration value
DEXUS scrip consideration3 $0.4787
Total cash consideration (assuming an implementation date of 31 March 2014) $0.7265
Recommended Proposal value per CPA Unit $1.2052
Recommended Proposal represents a premium to CPA's:
- Closing price on 7 November 2013 ($1.190) 1.3%
- Closing price on 23 July 2013a ($1.085) 11.1%
- 30 day VWAP on 23 July 2013a ($1.071) 12.5%
- Stated 30 June 2013 NTA ($1.150) 4.8%
a. The day prior to CMIL's announcement that it had received a preliminary internalisation proposal from CBA, which was released to the ASX on 24 July 2013.

The Consortium believes this Recommended Proposal is compelling and, if implemented, provides CPA Unitholders with an attractive premium for their units and on-going participation in the benefits associated with an investment in DEXUS.

Process Agreement with CMIL

The Consortium has entered into a conditional Process Agreement with CMIL (see copy attached) under which the parties must negotiate in good faith to agree a binding Implementation Agreement by mid December 2013.

Under the Process Agreement, CMIL has granted the Consortium a period of exclusivity to conduct due diligence. The parties currently expect that due diligence will be completed within four weeks followed by entry into a binding Implementation Agreement.

The Independent Directors of CMIL have confirmed that, if the Recommended Proposal proceeds, they will recommend that CPA Unitholders vote in favour of it at any meeting in the absence of a superior proposal and subject to an independent expert opinion that the Recommended Proposal is in the best interests of CPA Unitholders.

The Process Agreement confirms that the Recommended Proposal is subject to a number of conditions, including:

  • the Consortium completing satisfactory due diligence
  • CPA Unitholder approval of a trust scheme, and
  • approvals from regulators (including FIRB and ACCC).

Agreement with CBA

In its announcement on 11 October 2013, DEXUS announced that it had submitted to CBA an indicative and non-binding ancillary proposal outlining a potential facilitation of the Proposal and transition of the management of CPA ("Ancillary Proposal").

DEXUS and CBA have now agreed an indicative term sheet for the Ancillary Proposal, including a facilitation payment of $41 million and that CBA will grant DEXUS due diligence in relation to the management arrangements of CPA.

DEXUS and CBA have today entered into a Confidentiality and Exclusivity Deed ("Deed"). The Deed, including the term sheet for the Ancillary Proposal (a copy of which is also attached) sets out the terms of the arrangements between the parties, including exclusivity arrangements in favour of DEXUS that extend until 24 December 2013.

The Ancillary Proposal is subject to implementation of the Recommended Proposal, due diligence and execution of a binding Facilitation Deed.

Attachments

Note: Australian Dollars (AUD) have been used as the reference currency for this release.

About DEXUS

DEXUS Property Group (DEXUS) is one of Australia's leading real estate groups, investing directly in high quality Australian office and industrial properties. With a total of $13 billion of assets under management, DEXUS also actively manages office, industrial and retail properties located in key Australian markets on behalf of third party capital partners. DEXUS manages an office portfolio of over 900,000 square metres across Sydney, Melbourne, Brisbane and Perth and is one of the largest institutional owners of office buildings in the Sydney CBD, Australia's largest office market. DEXUS is a Top 50 entity by market capitalisation listed on the Australian Securities Exchange under the stock market trading code 'DXS' and is supported by more than 18,000 investors from 15 countries. With over 25 years of experience in commercial property investment, development and asset management, DEXUS has a proven track record in capital and risk management, providing service excellence to tenants and delivering superior risk-adjusted returns to investors. www.dexus.com

Download the DEXUS IR app to your preferred mobile device to gain instant access to the latest stock price, ASX Announcements, presentations, reports, webcasts and more.

DEXUS Funds Management Ltd ABN 24 060 920 783, AFSL 238163, as Responsible Entity for DEXUS Property Group (ASX:DXS)

About Canada Pension Plan Investment Board

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 18 million Canadian contributors and beneficiaries. In order to build a diversified portfolio of CPP assets, CPPIB invests in public equities, private equities, real estate, infrastructure and fixed income instruments. Headquartered in Toronto, with offices in London and Hong Kong, CPPIB is governed and managed independently of the Canada Pension Plan and at arm's length from governments. At June 30, 2013, the CPP Fund totalled C$188.9 billion of which C$20.9 billion represents real estate investments. For more information about CPPIB, please visit www.cppib.com.

CPPIB has agreed to the statements made by and references to CPPIB in this release. However, CPPIB has not authorised any of the statements made by DEXUS or the references to or concerning DEXUS Property Group in this release.


  1. Other than those to which DEXUS is already entitled under DEXUS's forward contract with Deutsche Bank AG, announced to the ASX on 25 July 2013. If the Recommended Proposal proceeds, DEXUS currently intends to take early delivery of those CPA Units under the forward contract. However, DEXUS reserves the right to cash settle the forward instead of taking early delivery. If it does so, the Recommended Proposal will relate to 100% of the units in CPA.

  2. On 23 October 2013 CPA released revaluations completed across six properties and subsequently on 5 November 2013 announced draft revaluations across 16 properties. The combined expected increase against prior book values is estimated to be $74 million.

  3. Based on the closing price of DEXUS Stapled Securities as at 7 November 2013 of $1.06.

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