Eq­uity firms eye­ing Aussies for takeover

The Weekend Australian - Review - - Prime Space - Turi Con­don Merg­ers

US in­vest­ment group Morgan Stan­ley’s $ 6.6 bil­lion takeover of­fer for prop­erty fund In­vesta could be just the first of many, with global private eq­uity play­ers hav­ing up to $ US300 bil­lion ($ 356 bil­lion) in their pock­ets to spend on Aus­tralian com­pa­nies such as Lend Lease and Mul­ti­plex.

Mer­rill Lynch an­a­lysts say there could be $ US104 bil­lion in the cof­fers of prop­erty private eq­uity firms com­mit­ted, but not yet spent, for Aus­tralian takeover or merger tar­gets.

‘‘ As­sum­ing a 65 per cent gear­ing, this can mean al­most $ US300 bil­lion buy­ing power,’’ Mer­rill Lynch says.

Ear­lier this month Morgan Stan­ley launched a $ 4.7 bil­lion cash bid for In­vesta. The friendly of­fer of $ 3.08 a se­cu­rity puts an all- up value ( in­clud­ing debt) of $ 6.6 bil­lion on the Syd­ney prop­erty group — the big­gest of­fice tower land­lord in the coun­try.

It could also kick off an­other wave of takeovers as off­shore and lo­cal groups run the ruler over com­peti­tors.

Colo­nial First State’s re­tail of­fice trust, CFS Re­tail, was the most vul­ner­a­ble to takeover or merger, ac­cord­ing to Mer­rill Lynch.

Next on the list were the two big builder/ de­vel­op­ers Mul­ti­plex and Lend Lease ( Mul­ti­plex is al­ready the sub­ject of a takeover of­fer from Canada’s Brook­field and the found­ing Roberts fam­ily).

Deutsche Bank’s RREEF trust, Mir­vac, APN/ UKA Euro­pean Re­tail Trust, and Com­mon­wealth Of­fice also rank highly as po­ten­tial takeover tar­gets. Mer­rill Lynch looked at what makes a com­pany vul­ner­a­ble, in­clud­ing bal­ance sheet strength, man­age­ment’s will­ing­ness to sell, value of in­di­vid­ual as­sets and the strength of cash flows.

An ac­qui­si­tion of re­tail prop­erty gi­ant West­field Group is un­likely, the firm says.

‘‘ The Lowys ( the fam­ily who run and con­trol the busi­ness) are well com­pen­sated, high- profile man­agers of one of the largest Aus­tralian com­pa­nies and global real es­tate in­vest­ment trusts,’’ Mer­rill Lynch says.

An­other an­a­lyst, JP Morgan, picks the Mac­quarie Bank- man­aged Mac­quarie Of­fice Fund as a po­ten­tial tar­get.

‘‘ We think Mac­quarie Of­fice Fund will ei­ther buy out the share owned by the Black­stone Group in a num­ber of joint ven­ture as­sets or, with Black­stone, dis­pose of as­sets,’’ JP Morgan says.

‘‘ Buy­ing core as­sets in qual­ity US mar­kets is now pretty well out of Mac­quarie Of­fice Fund’s league.’’

But if Mac­quarie Of­fice is a tar­get, Mac­quarie Bank would re­spond to any suitor in ‘‘ full force’’, JP Morgan says. ‘‘ De­spite that, a bid can­not be ruled out.’’ Mac­quarie Coun­try­wide Trust, which has 251 prop­erty as­sets in four coun­tries, is al­most ‘‘ takeover proof’’ with its move into the US, which is also highly prof­itable for unithold­ers, JP Morgan says.

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