Dexus today announces that it has agreed terms to acquire all of the units in the APN Property Group in a deal covering $3 Billion of real estate assets.
Dexus and APN announced the deal this morning, confirm that they had entered into a binding Scheme Implementation Deed for an all-cash consideration of 91.5 cents per security.
In the absence of a superior proposal and subject to the Independent Expert concluding that the Proposal is in the best interests of APN securityholders, the directors of APN and APN RE Limited unanimously recommend that APN securityholders vote in favour of the Proposal. Subject to those same qualifications, each APD Director intends to vote all of the securities held or controlled by them (representing 33%) in favour of the Proposal.
In addition, APN’s Chairman and largest securityholder, Chris Aylward, via his related entities, has granted a call option to Dexus over APN securities equivalent to 19.9% of issued capital, at the Offer Price (‘Call Option Agreement’), exercisable in certain circumstances.
APN Property Group has $2.9 billion in funds under management including its two ASX-listed Real Estate Investment Trusts , APN Industria REIT and APN Convenience Retail REIT and also manages direct unlisted property and securities funds with $134 million of co-investments in its managed vehicles.
The Proposal is underpinned by a strong investment rationale for Dexus:
- Access to a complementary and scalable business with a high-quality team and like-minded investment philosophy;
- Ability to utilise Dexus’s market leading funds and property management platform to drive growth and performance for new and existing APN funds;
- Provides Dexus with a range of new growth opportunities via access to new investor groups and products;
- Adds $2.9 billion of incremental FUM which will be immediately accretive to Adjusted Funds From Operations (AFFO) per security on completion of the transaction in FY22; and
- Potential to realise cost and revenue synergies and achieve margin expansion across the platform
Dexus Chief Executive Officer, Darren Steinberg said: “This transaction supports our strategic initiative of expanding and diversifying our funds management business, increasing our suite of funds on offer outside of wholesale funds into listed REITs, real estate securities funds and unlisted direct property funds. The transaction also expands our investor network to include retail and high net worth capital.
“We believe APN is a high quality real estate funds management business that complements our existing platform, and we look forward to APN’s executives joining and strengthening the Dexus team while continuing to deliver strong results for investors”.
APN’s Chairman and largest securityholder, Chris Aylward said: “Dexus’s proposal represents compelling value to APN securityholders including a material premium to APN’s trading price. We believe the combination of the two platforms will provide incremental growth opportunities for the APN business as well as its underlying funds, investors and team members.”
“We are very proud of the APN platform and the value it has created not only for APN securityholders but for the investors in our property funds. We look forward to seeing the continued growth of the APN funds and delivery of returns to our investors as part of the Dexus real estate funds management platform. We do not anticipate any disruption to business operations.”
APN CEO, Mr Tim Slattery, commented: “I’m very pleased to see the value of our business built up over many years recognised through this proposal and to recommend it to APN’s securityholders. Dexus’ property and funds management platform is very well regarded and in combination with APN’s capabilities represents an excellent ongoing opportunity for our funds’ investors and our team.”
Dexus proposes an all-cash Offer Price of 91.5 cents per APN security. The Offer Price will be reduced by the value of any distributions declared by APN on or after the date of this announcement and prior to 30 September 2021, up to 1.5 cents per security.
The cash price of 91.5 cents represents a:
- 50.0% premium over the closing price of APN securities of 61.0 cents on 10 May 2021, the last trading day before this announcement;
- 64.3% premium over the 1 month volume weighted average price3 of 55.7 cents; and
- 65.8% premium over the 3 month volume weighted average price3 of 55.2 cents.
Total consideration payable by Dexus represents an equity value of $320 million and enterprise value of $308 million.
The scheme implementation deed also details circumstances under which APN may be required to pay Dexus a break fee of $3 million and circumstances where Dexus may be required to pay APN a reverse break fee of $3 million.
Dexus expects that on completion of the transaction in FY22 it will be immediately accretive to its Adjusted Funds From Operations (AFFO) per security.
Further Information
We are not surprised by this move. The previous stapled structure the 3 trusts within the Dexus was an impediment to M&A Activity and the move last month to remove this has opened up the way for Dexus to become more acquisitive.
We are however surprised that Dexus elected to target APN. Dexus is traditionally a core manager and has moved successfully into Healthcare Real estate as a diversification, however has stayed clear of Property Securities and other alternative assets classes such as Fuel Stations.
The APN Industrial REIT and the APN Convenience Retail REITs are both on our Top Picks List, so we do support a move into these sectors.
We expect Dexus will use the Industrial REIT platform as a co-investment vehicle to its wholesale business interests which will make the removal of Dexus as a manager of those REITs harder to unwind. Whether this is in the interests of unit holders of the REIT remains to be seen.
Attached is the Implementation Deed
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