Charter Hall and Hostplus take $710m bet on regional pubs landlord
Charter Hall, the ASX-listed diversified real estate investments giant, has partnered with hospitality industry superannuation fund Hostplus to lob a $710 million takeover bid for pubs landlord Hotel Property Investments.
But HPI, which listed in 2013 and owns 58 pubs, mainly in Queensland and South Australia, has rejected the $3.65-a-share bid, with the company’s board telling investors that the deal represents a tiny premium on its share price and is actually lower than the value of its total assets.
Charter Hall is already the country’s biggest pubs owner after buying former ASX-listed landlord ALE Group for $1.7 billion in a deal backed by Hostplus three years ago. That deal made it the landlord of some of the country’s best-known watering holes, including Young & Jackson in Melbourne.
HPI’s pubs are leased to Australian Venue Co, a major hotel operator which was sold by KKR to PAG Asia capital in a $1.45 billion deal this year.
“The board has unanimously concluded that the offer is opportunistic, not compelling and materially undervalues HPI,” the HPI board said in a statement on Monday morning. “HPI believes that its existing portfolio and current strategy, including its organic growth initiatives, offer significantly greater value to HPI securityholders.”
The $3.65-a-share offer was made through Charter Hall’s retail real estate trust and a Charter Hall managed trust on behalf of Hostplus. HPI shares rose 5.46 per cent to $3.67 after the announcement on Monday.
The bidders have tapped Barrenjoey and Citi as advisors, while HPI has called in Bank of America and Denison Partners as defence advisers.
Charter Hall is already HPI’s largest shareholder, acquiring a near 15 per cent stake through its Charter Hall Retail REIT at $3.35 a share in March.
At the time, the purchase prompted speculation about Charter Hall’s ultimate plan, given the company has a record of take-private transactions with property players, including Irongate, the office and industrial real estate firm with a $1.7 billion portfolio which was purchased in 2022.
“We believe the proposed transaction reflects increasing potential for M&A activity in the sector, given Charter Hall’s track record with listed REIT acquisitions,” Citi analyst Suraj Nebhani wrote to clients in March.
Charter Hall said the takeover offer, which is fully funded, provided an attractive premium to HPI’s historical trading levels. It said there were no other competing offers, and the likelihood of a competing proposal was low due to the company already being the largest shareholder.
“The proposed acquisition of HPI alongside Hostplus is attractive and designed to deliver significant benefits to both HPI security holders and Charter Hall Retail REIT unitholders,” Charter Hall retail chief executive Ben Ellis said. “The acquisition is in line with Charter Hall Retail REIT’s strategy to invest in high-quality, net lease retail assets, while partnering with leading convenience retailers to deliver resilient and growing income streams.”
The takeover bid comes during a period of subdued investment in pubs, with $646 million worth of assets changing hands in the six months to June 30, according to data published by realtor JLL. That was down 54 per cent from the same period last year, the company said.
“This is primarily a result of the current macroeconomic environment, which has seen a slowdown in the supply of realistically saleable assets and a number of capital sources take a seat on the sidelines,” said JLL’s Peter Harper. “We also note that much of the current [year-to-date] volume could be classified as last year deals, having been either exchanged in 2023, or had most of the groundwork done then.”
Earnings at Charter Hall Retail REIT, which owns smaller shopping centres, convenience stores and petrol stations, fell 4.7 per cent in the 12 months to June 30. Operating earnings, a key measure of profitability, fell to $159 million last year from $166.9 million in the previous financial year.
