Investa stand-off enters the end game

Data Room.

IT’S crunch time for Investa Property Group. The threat of a sale has hung, like a sword of Damocles, over the Morgan Stanley-backed $9bn real estate empire for years.

By next Tuesday its fate may be sealed. According to sources, Investa’s board will meet to finalise how and when to sell its $3.5bn property portfolio, which includes some of the country’s most iconic buildings, such as Deutsche Bank Place. A decision to internalise its listed vehicle, Investa Office Fund, may follow although this plan could be derailed if a suitor bids for the entire platform.

Prospective buyers are already preparing to pounce. Private equity giant Blackstone is the latest to veer into view with sources claiming the firm is keen to acquire all of Investa, including IOF and its wholesale vehicle, ICPF.

As The Australian revealed last week, LaSalle Investment Management, one of the world’s largest property investors, is hoping to elbow its way to the front of the queue by luring the Middle Eastern sovereign wealth fund, ADIA, into a bidding consortium.

It has appointed Goldman Sachs as its adviser and like Blackstone is pitching to acquire the entire business. Yet Investa has already arranged its defences in expectation of a full takeover offer.

Morgan Stanley and UBS are advising the group, while Macquarie and Fort Street are tending to IOF.

Investa’s board meeting, which will see some of Morgan Stanley’s heavyweight’s roll into Sydney, is scheduled two days before IOF is due to release its results on February 19. While there is a growing expectation Morgan Stanley and Investa’s directors will sign off on an auction of the Investa Property Group assets, the decision is likely to leave IOF vulnerable to a takeover assault.

Both the listed office landlord and its unlisted stablemate hold extensive pre-emptive rights over Investa’s assets. In a further complication, IOF has the right to buy a stake in the Investa platform once it hits $3.5bn of local assets. The conflicting interests risk pitting the two funds’ independent directors against the parent, although such a showdown may be avoided if an offer for the entire business proves compelling.

Orica LBO challenge

MANY in the market have consigned mega leveraged buyouts to history. Yet even at the smaller end of the scale, LBOs remain a challenge, as evidenced by Blackstone’s pricier than anticipated funding deal on its $750 million Orica chemicals business.

The acquisition marked the ­private equity giant’s first deal in Australia — outside the property sphere, where it is an influential player. But returns on the investment may have been weakened slightly after weak investor appetite forced a rate hike on a $US515m ($663m) debt raise in the US last week, potentially making the overall deal more expensive.

Blackstone had hoped to sell the loans to investors at between 5 and 5.25 per cent interest, accompanied by a Libor floor of 1 per cent and an issue discount of 99c.

Instead, the raise was finalised at a far higher 6.25 per cent, with the discount set at 95c.

Once the terms were loosened, investor appetite sharpened. Macquarie Group’s expanding lending and asset finance arm, CAF, overseen by veteran banker Ben Brazil, numbered among the investors, as did HSBC, Europe’s largest bank, which is in the midst of a firestorm following allegations it helped wealthy clients avoid tax.

A number of US-based hedge funds are also in the mix for the Orica debt, with Och-Ziff likely to have snapped up a sizeable tranche. Yet while there was ample liquidity for the altered loan terms, the raise underscores the choppy nature of the US high-yielding debt markets.

Early last year, the mood was far more ebullient. But now investors have adopted a selective approach to covenant-lite deals, despite record-low interest rates.

Part of the problem is the slump in oil prices. But sources said in Orica’s case, US investors were unfamiliar with the structure of the business, as most US chemical companies are divided into either manufacturers or distributors. Orica comprises both elements.

APN’s plan for NZME

ONE point of interest today will be whether APN News and Media offers any further insight into its plans for the company’s New Zealand operations when it reports its results.

Recently rebranded NZME, APN New Zealand had been earmarked for a potential IPO, but the understanding is that the plans for the on-again off-again deal have been shelved.

APN’s strategic plan for NZME is apparently to hold onto the business for the next 12 months in the hope of an earnings uplift. Further confirmation on this could be ­offered today by chief executive Michael Miller.

A float of NZME had originally been pitched to Australian fund managers but retail investors across the Tasman later became the focus when it was apparent that the group would be unlikely to attract the price for the business that it had hoped for.

On offer in APN’s stable are The New Zealand Herald, The Radio Network and the digital business GrabOne.

New Zealand banks Forsyth Barr and First NZ Capital, which is in alliance with Credit Suisse, were the advisers for NZME, which last year was said to be worth anywhere between $280m and $490m.

Wal King on board

LJ HOOKER is known for the high-profile businessmen it counts as its investors, but one of the new names to emerge within the cluster is Wal King, the former chief executive of Leighton Holdings.

The real estate chain has been for sale for some time through adviser Lazard and there is scuttlebutt that the depth of appetite for the business may be weaker than anticipated.

Esteemed consortium owners include RAMS Home Loan founder John Kinghorn, yachtsman and developer Syd Fischer, and Macquarie Real Estate banker Antony Green.

Mr King, who ran construction giant Leighton Holdings from 1987 to 2010, has just a small stake, but other former Leighton top brass are also part owners of what is one of Australia’s largest real estate agencies.

The high-profile backers were originally in favour of a sales process, but there is chatter that it is looking increasingly doubtful that a price can be achieved where they won’t crystallise a loss on their ­investment.

One rumour has circulated that the sales process is now off at the request of investors, but that was quashed this week by the chairman, former Mirvac Group managing director Greg Paramour, who said it was still in progress.

LJ Hooker has 700 franchises in Australia and New Zealand and a growing platform in Asia.

It was sold by Suncorp in 2009 for about $67 million to the consortium led by Janusz Hooker, the grandson of founder Leslie Joseph Hooker.

Mr Hooker, a former New York banker with WP Carey, was at one stage the company’s chief executive following the acquisition but is now deputy chairman.