Global buyout fund Kohlberg Kravis Roberts appears to be in spending mode in Australia, with not just Property Exchange Australia and Westpac wealth management in its sights, but real estate assets as well.
It is understood that the New York-based buyout fund that became the subject for the book Barbarians at the Gate over its corporate buyout of American conglomerate RJR Nabisco, has been in talks about a deal to buy a stake in The Australian Unity Healthcare Property Trust that has been subject to takeover threats from NorthWest Healthcare Properties.
As reported earlier by this column, the Australian Unity-run healthcare trust has made approaches to some real estate groups about forming a partnership and taking a stake in the business to fend off its aggressive suitor NorthWest, which itself has secured a stake of about 16 per cent in the Australian Unity healthcare fund through option agreements.
NorthWest took a similar approach with Healthscope to gain control of its real estate assets, which it now owns in a joint venture with Singaporean sovereign wealth fund GIC. The fund bought a stake in hospital operator Healthscope when it was a takeover target about two years ago to buy itself a seat the negotiating table.
The move drew criticism from its investors from a corporate governance perspective in its New Zealand-based Vital Healthcare Property Trust, after it used funds from the balance sheet of that company to secure a stake in Healthscope.
NorthWest made a $2.5 billion bid for the unlisted Australian Unity Healthcare Property Trust wholesale trust this year equating to $2.35 per unit, but was rebuffed by the fund’s management. It recently sweetened the offer to $2.55 per unit.
Discussions to secure a defensive stake by the Australian Unity fund have been held with The GPT Group, Charter Hall and Dexus Property Group, but DataRoom understands that KKR has had talks about taking an interest as well.
The fund owns 62 healthcare assets such as hospitals, medical centres and aged-care facilities and KKR is thought to be drawn to the healthcare exposure as well as the real estate.
Earlier, KKR had lined up to buy the Moorebank logistics operation from Qube before only the real estate was sold off to property group Logos in a $1.65 billion agreed deal.
Sources say that the buyout fund has become more focused on real estate and healthcare for acquisitions following management changes in its Australian team, which is led by Scott Bookmyer.
The real estate talks have been unfolding at a time that KKR is also said to have held prolonged talks with Westpac about buying its wealth management operations once it finalises its $1.7 billion purchase of a 55 per cent interest in the Commonwealth Bank’s Colonial First State wealth management business.
Morgan Stanley is running the sale process for that operation with information memorandums set to be in the market around July or August.
However, other bidders are said to be nervous about lining up with a view that the operation will be KKR’s for the taking.
When acquiring the Colonial First State interest, it worked with Bank of America.
The appeal for KKR to the Westpac business is the more modern platform in the Westpac business, Panorama.
Colonial First State has old platforms that need replacing.
Analysts estimate Westpac’s wealth platform could be worth between $700 million and $1 billion.
While Westpac and Australian Unity’s healthcare properties are said to remain of interest to KKR, it’s PEXA that was gaining its attention at the weekend.
The buyout fund remains front and centre in the battle for the electronic settlements business after joining forces with the Nine Entertainment-backed Domain Holdings Group and asserting itself with a bid that values the business at $3.1 billion.
The approach, which would likely see it acquire about 84 per cent of the business owned by Link Administration Holdings and Morgan Stanley Infrastructure Partners was set to expire at the weekend and be followed by a similar offer from competition rival Dye and Durham.
The strongarm tactic could accelerate a sale of PEXA, which has been subject to a dual track process, although the float has been given a value of $3.3 billion, with a bookbuild held on Friday night to raise $1.17 billion for a listing on July 6.
The cornerstone process was fully underwritten and sold down to investors.
The aggressive move is seen as typical of KKR, which has made a number of acquisitions in the Australian market in recent years including Arnott’s Biscuits for $3.2 billion in addition to the CBA wealth investment.
When it purchased the Australian-listed accounting software business MYOB in 2019 for $2 billion, it cut the price on the final day and gave the company a deadline to accept the offer within days.
PEXA is in demand amid an environment of low interest rates and a booming property market and an interest of about 42 per cent in the business was placed up for sale by Link after it received a $2.9 billion buyout proposal from The Carlyle Group and Pacific Equity Partners last year.
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