Dexus has confirmed plans to acquire the AMP Capital real estate and domestic infrastructure equity, recently rebadged as Collimate.
The deal comprises a $250 million upfront cash payment and earn out consideration of up to $300 million, which is subject to a range of factors including successful transition of assets under management and will be finally assessed nine months following completion of the Transaction.
In addition, Dexus will offer to acquire co-investment stakes in the platform for total cash consideration of up to approximately $450 million, subject to discussions with investors, pre-emptive rights processes and relevant consents.
Darren Steinberg, Dexus CEO said: “I am excited to announce this opportunity which positions Dexus as a leading real asset manager, with new capabilities and an expanded product offering, underpinned by our best practice governance and risk management framework. It delivers on our strategic objectives of being a real estate partner of choice and delivering resilient income streams, while enhancing our ability to leverage the key megatrends benefiting real assets. This alignment forges the pathway to creating long-term value for our Dexus Security holders and the investors across our funds management platform, both existing and new.
“Infrastructure is a logical next step for Dexus’s funds management business, underpinned by compelling sector fundamentals and a positive growth outlook. The Collimate team has a strong track record and well established relationships with investors. This will now be enhanced by the core skills across the Dexus platform.
“Our more than 35-year track record in funds management, alongside our experience in integrating funds management businesses and assets, supported by transition services from Collimate, will enable us to provide continuity of service to our investors and funds management partners during the transition.”
Collimate’s real estate and domestic infrastructure equity business comprises a high-quality platform of pooled funds and separately managed accounts (“SMAs”). The platform currently has $27.9 billion of AUM, split between:
- Real estate ($18.2 billion); and
- Infrastructure ($9.7 billion)
Dexus plans to hold consultation sessions with Collimate investors over the coming weeks to discuss the merits of the transaction and determine the Collimate AUM to be transferred to the Dexus platform as part of the Transaction.
Collimate holds co-investment stakes in the platform funds totalling circa $180 million, which Dexus will offer to acquire as part of the Transaction, subject to pre-emptive rights processes and relevant consents.
In addition, Collimate has provided a commitment to acquire a further circa $270 million of units in AMP Capital Wholesale Office Fund (“AWOF”), which Dexus will also offer to acquire as part of the Transaction, subject to discussions with investors, pre-emptive rights processes and relevant consents. Total cash consideration payable by Dexus for these co-investments is dependent on their Current Unit Value at the time and is anticipated to be circa $450 million.
The $7bn AOWF Fund is also being targeted by Mirvac in a separate approach to investors. The AFR reported yesterday AWOF investors have told AWOF’s trustees that they would be willing to vote to transfer management rights to Mirvac within weeks. The fund owns stakes in landmark office towers such as Quay Quarter in Sydney and Collins Place in Melbourne.
Dexus offer to acquire the AMP Limited interest in AWOF may not be enough to overcome or block the Mirvac proposal, hence the inclusion of the deferred conditional payment.
Dexus intends to retain Collimate’s key people as part of the Transaction, to continue to support the real estate business and entry into the infrastructure segment alongside a strongly credentialed and established team.
The transaction is in line with Dexus’s strategy of expanding and diversifying its funds management business and will accelerate growth through the combination of two complementary platforms.
The transaction is underpinned by a compelling strategic rationale for Dexus:
- Further diversifies Dexus’s funds management platform with an expanded investor base
- Expanded capabilities to drive an enhanced offering and asset performance
- Provides a scalable platform for growth, underpinned by Dexus’s best practice governance and risk management framework
- Long-term value creation potential for Dexus Security holders and funds management partners
The combined benefits for third party investors on both the Dexus and Collimate platforms are:
- Integration of platform strengths and investment teams to create a leading real asset manager positioned to drive investment performance
- Enhanced access to deal flow and ability to access large-scale opportunities that require significant capital commitments
- Focus on governance, active asset management and long-term value creation for investors through the cycle. Dexus has a demonstrated track record as a trusted custodian delivering long-term outperformance
- Potential ability to deliver positive ESG outcomes across the combined portfolio, with the Dexus platform globally recognised as an ESG leader
- Access to liquidity through a breadth of investor relationships
Under the SPA, the total consideration payable by Dexus is between $250 million and $550 million, subject to a range of factors including successful transition of AUM. The consideration comprises a $250 million upfront cash payment and earn out consideration of up to $300 million.
The Transaction is expected to be accretive to Dexus Securityholders on an AFFO per security basis in the first full financial year post completion6.
Pro forma gearing is expected to remain within the target gearing range of 30 – 40%. A number of capital recycling initiatives are under consideration to reduce gearing and provide capacity for redeployment. Net Tangible Assets per security is expected to reduce as a result of the Transaction due to the recognition of intangible management rights, goodwill and associated transaction costs.
As the Transaction is expected to complete during the first half of FY23, it will not impact Dexus’s previously stated FY22 guidance.
Collimate is required to use reasonable endeavours to undertake a restructuring process to deliver its real estate and domestic infrastructure equity business to Dexus and has agreed to indemnify Dexus in respect of the restructure as well as agreed risks including certain agreed liabilities related to divested businesses previously owned by Collimate.
The Transaction remains subject to the satisfaction of a number of conditions including: change of control processes being satisfied; receipt of specified consents; restructure steps being completed in accordance with agreed principles; and entry into a Transitional Services Agreement and related documents on acceptable terms.
Related Articles
