Hotel Property Investments (HPI) has rejected a takeover bid from Charter Hall Retail (CHR) and Hostplus, after receiving an unsolicited and conditional offer last month in which they intended to jointly acquire all the securities in HPI that CHR does not yet own.
The conditions of the offer would have seen CHR and Hostplus acquire all securities at a cash price of $3.65 per HPI security, and despite the bidder statement describing this as “an attractive premium to HPI’s historical trading levels”, the HPI Board unanimously voted to reject the offer.
A statement from HPI says 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”.
HPI benefits from a unique and high-quality portfolio of pub freehold assets, including more than 200 venues nationwide operated by Australian Venue Co (AVC), HPI’s major pub operator partner. Being the only pure-play pub real estate investment trust within the S&P/ASX300 index, HPI also has strong landlord-operator relationships, offering an attractive lease structure which allows for long term growth.
In terms of growth prospects, active portfolio management and ongoing refurbishment programs have allowed HPI to bolster its internal portfolio, while its relationship with AVC offers external growth and consolidation opportunities.
The investment trust continues to actively review its portfolio and asset recycling opportunities, having sold four assets in March this year for a total of $48.6m. HPI’s asset recycling program, along with strong revenue growth, prudent capital management and 100 per cent operator occupancy puts the business in a strong financial position.
With all of this considered, the HPI Board found that the bid from CHR and HostPlus is “opportunistic, not compelling and materially undervalues HPI”.
Despite economic challenges, pubs have remained an attractive asset class, and the HPI Board concluded that the existing portfolio and strategy offered much greater value to HPI securityholders, for whom it remains committed to maximising returns.
With the recent appointment of John White as CEO and managing director, who brings a wealth of experience in property and capital markets, the HPI Board sees significant opportunity for HPI to continue to grow through acquisitions and reinvestment strategies.