Charter Hall and Hostplus’ (the bidders) bid to buy Hotel Property Investments (HPI) continues to rumble on, but after HPI’s Board initially saying the offer undervalues the company, once the bidders had over 50 per cent voting power HPI advised shareholders to accept the offer.
The bidders first announced intentions of a joint takeover in September last year, stating that each business would contribute 50 per cent of the cash consideration to acquire HPI and that each would indirectly own 50 per cent of the acquired business.
HPI subsequently rejected the “unsolicited and conditional offer” stating that the offer is “not compelling and materially undervalues HPI relative to asset valuation benchmarks and comparable recent A-REIT merger and acquisition transaction precedents, and provides a negligible premium to recent trading prices”.
What has followed is a game of corporate cat-and-mouse with the bidders continually buying up shares in HPI, while the HPI Board remains steadfast in its belief that the offer undervalues its business.
On 18 December last year, the bidders announced a “notice of change of interests of substantial holder” to the ASX, which outlines when a major shareholder has changed the number of shares it owns.
This particular statement was significant as it took the bidders past 50 per cent ownership, building to a voting power of 52.38 per cent.
Change of advice
HPI subsequently issued a “Fourth supplementary target’s statement”, in which it outlined two recent developments in the takeover/offer and set out further advice and considerations for HPI securityholders from the company’s Directors.
The statement said: “As the Bidders hold more than 50 per cent of HPI Securities, they will be able to control the composition of the Board of HPI and influence HPI’s strategy, including in relation to HPI’s operations, capital management, distributions and management structure.
“As a result, the HPI Directors consider that it is likely that there will be changes to the governance and strategy of HPI. The increase in ownership will also impact the free float, future liquidity and broad investor appeal of an investment in HPI.
“Accordingly, after careful consideration of the advantages and disadvantages of accepting the Offer as discussed in sections 2 and 3 of this document, the HPI Directors have revised their recommendation and now recommend that securityholders ACCEPT the Offer before it closes on 31 January 2025.
“The Directors recognise that there are factors which may support a decision by securityholders to reject the Offer in order to continue to benefit from an investment in HPI’s unique portfolio of pub assets. However, retaining an investment would require securityholders to accept a range of risks, as detailed in this document.
“In deciding whether or not to accept the Offer for their own securityholdings, the Directors who own or control HPI securities are conscious of the risks of retaining an investment in HPI, given the possibility of a change in strategy as discussed in this document. One of those directors intends to accept the Offer for the HPI Securities that they own or control, following the record date for the most recently announced distribution (refer to section 4.1 below regarding HPI’s distribution announcement dated 12 December 2024). The other directors who own or control HPI securities intend to defer their decision until nearer to the closing date for the Offer and then assess the position at the time.
“Given that the Offer is not scheduled to close until at least 31 January 2025, securityholders have time to weigh up their decision having regard to their own personal circumstances.”
Since then the bidders have increased their shareholding in HPI on seven separate occasions, with the latest ASX notice on 10 January stating the bidders now have a voting power of 61.59 per cent.
The current offer runs until 7pm Sydney time on 31 January 2025, but the offer has been extended on five previous occasions, so it remains to be seen if the bidders will successfully achieve 100 per cent ownership by then, The Shout and Australian Hotelier will keep you up to date with developments in this process.