Dexus Simpler Structure comes at a cost24 March 2021
Dexus is proposing changes to its’ corporate structure as a means to achieve greater flexibility to expand and diversify its funds management business, however the move will come at a cost of $35m, including $30m of Stamp Duty.
The restructure is really about removing structural impediments to growth as Dexus seek to grow both organically and via M&A activities.
The “simplification” will allow equity interests in the individual underlying Dexus Trusts (which are all currently stapled together) to be issued directly to potential third party capital partners, providing Dexus with greater flexibility in meeting investment demand from investors for real estate assets.
The changes will more importantly remove CGT issues which currently make it difficult for the Group to pursue any merger and acquisition activity as CGT rollover relief has not been available to incoming security holders. Previously in any merger that Dexus has considered or executed, CGT rollover relief could only be provided in relation to one of the trusts in the structure.
The simplification may also give Dexus added flexibility to efficiently recycle assets currently held by the head trusts directly into trust structures and other funds. In addition, the simplification is expected to deliver reporting and administrative efficiencies for both security holders and Dexus.
Dexus has issued an Explanatory Memorandum outlining the proposal and will be asking unit holders to vote on the proposal in mid April.
The “simplification” proposes to “top-hat” each of Dexus Diversified Trust (DDF), Dexus Industrial Trust (DIT) and Dexus Office Trust (DOT) with a new Dexus Property Trust (“DPT”), so as to form a dual stapled group comprising Dexus Operations Trust (DXO) and DPT.
Specifically, the Simplification involves:
– The unstapling of the units in DXO from the units in DDF, DIT and DOT
– The issue of units in DPT to Security holders (excluding Ineligible Foreign Security holders) equivalent to the number of Dexus Stapled Securities they hold
– The acquisition by DPT (or its nominee) of all the units in DDF, DIT and DOT from Security holders
– The stapling of each unit in DPT to each existing unit in DXO to form a new stapled security (“New Stapled Security”)
– The unstapling of all of the units in DDF, DIT and DOT
– The listing of DPT on the ASX and the delisting (and expected deregistration) of DDF, DIT and DOT
DPT will be ultimately be listed on the ASX and the New Stapled Securities will trade on the ASX under the same code as the Dexus Stapled Securities trade currently (ASX: DXS).
The effect of the Simplification is that Dexus will become a dual stapled group, with DXO continuing to own Dexus’s management business, third-party funds management platform and select assets that form part of Dexus’s trading business, and DPT (through DDF, DIT and DOT) holding the passive assets of the Group.
The changes are also described in the following diagram.
The Dexus Wholesale Property Fund (which is the subject of the AMP Capital merger proposal) will remain as a separate vehicle and unaffected by the simplifcation proposal.
The simplification makes sense though comes at a significant cost which could really only be supported if there are opportunities for M&A which Dexus have in mind. We therefore expect more corporate activity to emerge from the group, including for example, the take over of the whole property empire of AMP Capital.
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