Bloomberg News

Charter Hall Office $1.2 Billion Sale Logical, JPMorgan Says

December 06, 2011

(Updates with closing share price in seventh paragraph.)

Dec. 6 (Bloomberg) -- Charter Hall Office, which yesterday accepted a sweetened A$1.2 billion ($1.3 billion) bid from two overseas funds, made the most logical decision possible, analysts at JPMorgan Chase & Co. said.

The Australian property trust’s independent directors yesterday approved a A$2.49-a-share conditional offer from Reco Ambrosia Pte, an affiliate of the Government of Singapore Investment Corp., and the Public Sector Pension Investment Board of Canada. The bid was a 6-cent-a-unit improvement to the funds’ last offer on Oct. 5.

The latest bid is “in the best interests of Charter Hall Office unitholders,” the REIT’s independent directors wrote in unanimously backing the offer yesterday. The shares climbed by the most in more than three months in Sydney trading today.

“In the absence of a higher bid, we see logic in the directors’ decision,” JPMorgan analysts led by Michael Scott wrote in a report dated yesterday. Still, “we would have liked to see a final offer price closer to net tangible assets,” Scott wrote.

Charter Hall Office could receive a higher bid than the funds’ offer -- which is at a 4.2 percent discount to the trust’s Australian net tangible assets per share of A$2.60 as of June 30 -- if shareholders vote against it, analysts at CLSA Asia-Pacific Markets, led by Bryan Howitt, wrote in a report today.

U.S. Asset Sale

The proposal is conditional on stipulations including an approval of the offer by 75 percent of Charter Hall Office unitholders and the completion of the sale of its U.S. assets, the group said. The trust is in the process of selling its U.S. properties to entities affiliated with Beacon Capital Partners for $1.71 billion.

Charter Hall Office shares rose 4.4 percent to A$3.57 as of the 4:10 p.m. close of trading in Sydney, more than A$1 higher than the offer price due to the anticipated distribution from the U.S. asset sale. JPMorgan estimates the U.S. assets will net A$1.14 per share, based on current exchange rates. The shares have jumped 24 percent since Aug. 26, before the group’s first approach.

Charter Hall Group, the trust’s current manager, will retain its management and 14.5 percent stake, the group said yesterday. A binding agreement must be executed by Dec. 22, and the proposal must be implemented by March 31 for the offer to become effective, Charter Hall Office said yesterday.

The bidders’ first two offers, at A$2.39 per unit, followed by an improved A$2.43-a-share bid, were both knocked back by the trust, which had said they weren’t adequate.

--Editors: Malcolm Scott, Andreea Papuc

To contact the reporter on this story: Nichola Saminather in Sydney at nsaminather1@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net


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