Australian Unity strikes back against NorthWest play with Dexus deal

Property heavyweight Dexus has swept into the takeover battle for the Australian Unity Healthcare Property Trust.

Executive general manager of Australian Unity real estate investment, Mark Pratt. Picture: Aaron Francis

Property heavyweight Dexus has swept into the takeover battle for the Australian Unity Healthcare Property Trust and will act as a white knight for the besieged fund manager, backing a $320m equity raising.

The move knocks aside a ­hostile $2.7bn takeover play by Canadian company NorthWest and the fund will now raise equity to advance its $1bn development pipeline and make fresh acquisitions.

Australia Unity will look to squelch NorthWest’s $2.7bn cash bid with a $180m placement to Dexus at $2.60 a unit, a 16 per cent premium to current net asset value, and just above the Canadian company’s bid.

The Australian Unity trust will make a $120m entitlement offer of wholesale units to existing investors and also take up $20m of units itself. It will also make a cash offer of up to $80m to enable investors who want cash to exit.

The deal entrenches Australian Unity as manager and also sets up a development co-operation agreement allowing it to explore co-investment and value enhancing deals with Dexus.

The healthcare fund will also get a first right of refusal over an indirect 25 per cent interest in Australian Bragg Centre, in Adelaide, being undertaken by Dexus that will be worth about $440m when it’s finished.

The proceeds will be used to strengthen the trust’s balance sheet for growth, providing funding to accelerate the execution of its significant development pipeline and near-term acquisition ­opportunities.

The deal keeps in place the ­existing management team – including property executive general manager Mark Pratt – and governance structure, which has delivered a return to unitholders of 25.09 per cent over the past 12 months – and 14.89 per cent per annum over the past five years.

Dexus has forged into the takeover battle by setting up a new healthcare platform tie-up with Australian Unity alongside its ­existing $1.1bn healthcare fund.

The property giant, which has made major moves in funds by merging the $5bn AMP Capital fund with its diversified vehicle and making a take over play for APN Property, is growing in the sector.

Dexus has also pushed into logistics as it seeks to make its ­in­vest­ment portfolio income stre­ams more resilient – and it will also lock in it status as the locally listed leader in healthcare property.

The company will be able to participate in Australian Unity’s much-vaunted pipeline of greenfield and brownfield developments, and, crucially, it will have a first right over the Australian Unity management platform for the health fund if it ever comes up for sale.

Dexus chief executive Darren Steinberg said the company was “confident in the outlook for healthcare real estate, and the investment in AUHPT provides us with an efficient way to increase our exposure to this attractive asset class at an appealing price”.

“The broader relationship with Australian Unity provides an opportunity for us to accelerate our growing footprint in healthcare real estate and provides our funds and third-party partners with ­additional investment opportunities,” he said.

Dexus will end up with a stake of about 7 per cent of the healthcare property fund, putting it behind largest shareholder Hume, which has about 16 per cent and has struck a separate deal with NorthWest.

The takeover battle is still ­expected to roll on to a planned meeting to vote on the $2.7bn takeover scheme in July. However, this could be thwarted by the Dexus tie-up.

Australian Unity said it had stepped up its hunt for a partner after NorthWest’s first bid for the trust in February. This spurred ­renewed inbound interest from “a variety of parties seeking to partner” after talks were held with ­rivals last year.

The target fund is still looking to shake off NorthWest, which sweetened its bid for a third time last month, saying it had kicked off legal proceedings to seek ­judicial advice about the investor meeting which the Canadian company has called.

A NorthWest spokesman said it was “considering our position, including our legal options”.