Dexus presses the pause button on ASX amid talks to acquire 80 Collins Street in Melbourne

  • May 01, 2019 AEST
  • Team Kalkine
Dexus presses the pause button on ASX amid talks to acquire 80 Collins Street in Melbourne

Dexus (ASX: DXS) entered a trading halt today after Dexus Funds Management Limited as a responsible entity of Dexus Industrial Trust, Dexus Office Trust, Dexus Diversified Trust and Dexus Operations Trust (together Dexus) requested the stock exchange to put Dexus Stapled Securities on halt, pending the release of a further update on potential material acquisition.

This comes after the company in response to media speculation confirmed that it is in the initial phase of exclusive due diligence to purchase 80 Collins Street located in Melbourne alongside confirming capital initiatives.

The media report claimed that Dexus has placed the highest bid amounting $1.4 billion to take over the 52-storey office building at the 80 Collins Street of Melbourne. More interestingly, the deal is being viewed as one of the biggest deal in the space of Melbourne’s commercial real estate space.

Australian Government’s owned investment company, QIC, stands on the other end of the deal as it declared to sell-off the octagon-shaped premier office building, 80 Collins Street, in the recently held auction. The rivals Charter Hall and Mirvac were standing alongside Dexus in the final round of the bid, but it had been seen that the Dexus’ giant $1.4 billion offer has won the battle.

The market participants believe that Dexus is currently mulling over to raise a thousand million dollars in order to add the financial arm to the purchase of 80 Collins Street, Melbourne. However, the company has yet not come up with any formal capital raising announcement in this regard.

This office building would add significant value to the Dexus’ already established portfolio of Collins Street buildings. Collins Street forms part of the central business district (CBD) of Melbourne which is viewed as a central business and financial centre of the City. In this region, the Real Estate Investment Trust, Dexus owns 360 Collins Street and 60 Collins Street offering office accommodation in the prime location of Melbourne CBD to create long-term value for investors in the supply cycle.

Moreover, the company recently settled the acquisition of the remaining 50% of the MLC Centre, Sydney at a purchase consideration of $800.0 million. This is a line to the company’s strategy to sell-off out of a non-core market and increase its investment into a core market to drive investment performance for Dexus investors and its capital partners.

Outlook:

In March 2019 Quarterly Report, Dexus reaffirmed its FY2019 guidance for distribution per security growth of ~5% with the distribution payout ratio expected to remain consistent with free cash flow.

DXS last traded at $12.500 with a price to earnings multiple of 8.720x and a market capitalisation of $12.7 billion. Over the past 12 months, the stock has gone up by 31.72% including a positive price change of 7.76% recorded in the past three months.

In today’s market announcement, the Australian Securities Exchange stated that Dexus securities would remain in a trading halt until 3 May 2019 or the release of an announcement as stated above.


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