NorthWest raises funds for tilt at Australian Unity fund

The fight for the hospital owning trust has drawn in the biggest players in the market.

Australian Unity Real Estate Investment executive general manager Mark Pratt

The $2.7bn takeover battle for the Australian Unity Healthcare Property Trust is poised to spark into life just days after property group Dexus emerged as a white knight for the incumbent manager.

The contest for the vehicle that owns hospitals and medical centres shows how these assets have been thrust into the centre of commercial property as traditional assets like shopping centres come under pressure.

The trust‘s Canadian suitor NorthWest Healthcare Properties REIT has just unveiled a $C200m equity financing, saying this would partly go to providing financial flexibility for its proposal to acquire the local healthcare property trust.

NorthWest said that it has made a fully funded, all-cash offer for the trust‘s units, and is acting with the backing of Singaporean sovereign wealth fund GIC, that accounts for 70 per cent of the buying consortium.

The Canadian group has already taken a 5 per cent stake in the target trust and can count on Melbourne-based Hume Partners for an additional 11 per cent at a forthcoming scheme meeting to decide the trust‘s future. It is already a substantial owner of medical assets in Australia.

NorthWest has bid at a price of $2.55 per wholesale unit and has said its twice sweetened offer is best for all investors despite many older retirees holding their interests for the income they produce.

The Canadian group‘s bid was sideswiped on Wednesday when Dexus swept into the takeover battle for the Australian Unity-run trust, and said it would back a $320m equity raising.

The move dented the hostile play by NorthWest and the Australian Unity-run fund said it would raise equity to advance its $1bn development pipeline and make fresh acquisitions.

Australia Unity is looking 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 said it would 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 raised NorthWest‘s hackles as it entrenches Australian Unity as manager and also sets up a development co-operation agreement allowing it to explore 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 deal keeps in place the ­existing management team – including property executive general manager Mark Pratt – and governance structure, which the Canadian raider has criticised.

The fund 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 is understood to have held long-running talks with Australian Unity ahead of the Canadian group‘s incursion. It is keen to set up a new healthcare platform tie-up with Australian Unity alongside its ­existing $1.1bn healthcare fund.

Dexus will end up with a stake of about 7 per cent of the healthcare property fund, putting it behind largest shareholder Hume, which had 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 last week it had kicked off legal proceedings to seek ­judicial advice about the investor meeting which the Canadian company called.