The real estate unit of Morgan Stanley has capped up a month of big real estate investments - worth about $12.5 billion - by agreeing to buy Australia’s Investa Property Group. Morgan Stanley Real Estate has made an offer of $3.8 billion (A$4.7 billion).
The offer price of A$3.08 for each Investa share represents a 14 per cent premium over the closing share price for Investa on Wednesday. It translates into a 23 per cent premium to volume weighted average price over the last six months.
The all-cash deal is a part of Morgan Stanley’s strategy aimed at boosting its real estate presence in the Asia-Pacific region. The offer values Investa at A$ 6.6 billion, inclusive of debt. Investa’s board has recommended the prospective deal to its shareholders. Their approval, which I may add is more or less expected, is all that is needed for the deal to go through. But before that, an independent auditor from KMPG needs to confirm that the offer is in Investa’s interests.
Investa issued a statement that read:
We have negotiated an offer from Morgan Stanley Real Estate that represents very attractive value for our security holders, and subject to the Independent Expert confirming that the offer is in the best interests of security holders, the Directors unanimously recommend acceptance of the offer in the absence of a superior proposal.
Morhan Stanley’s Australia Chief Executive Steven Harker said:
Investa’s portfolio, with its attractive assets in Australia’s major cities, is a natural extension of our global real estate investing strategy.
He went on to emphasize Morgan Stanley’s commitment to create world-class real estate companies that have a strong growth potential.
The offer may have its roots in strong Investa performance in the second half of last year. It went on to double its earnings from property investments in the six months leading up to 2007. More recently however, it has had mixed fortunes and has been forced to make write-downs.
Nevertheless, it remains Australia’s largest listed manager of office buildings and enjoys considerable holdings in Sydney and Melbourne, two of the largest cities in Australia. Its acquisition will surely go on to boost Morgan Stanley’s presence down under, despite the sector being in a virtual slump.
