The news: The directors of ASX-listed REIT Hotel Property Investments (HPI) have unanimously recommended that the company’s shareholders reject a “best and final” takeover offer by Charter Hall Retail REIT and Hostplus, announced on Friday.
The numbers: HPI directors told shareholders that the offer of $3.85 per share — up from a $3.65-per-share bid that was rejected last month — was “not compelling, materially undervalues HPI’s portfolio and does not compensate HPI securityholders for the value of our unique portfolio, or the strength and outlook for our business”.
HPI shares last closed at $3.50 per share, having gained more than 20% this year.
The context: The directors of HPI, which owns a portfolio of 58 Australian convenience hotel properties, urged shareholders to reject the offer on the basis that is does not provide a premium to the company’s net tangible assets, fails to reflect the value to security holders of distributions growth, and implies a valuation for HPI’s portfolio that “reflects a material discount” to comparable pub portfolios.
They also said the offer “provides a negligible premium for control relative to the recent trading prices of HPI securities prior to the initial offer” and “carries a clear implication that the bidders could justify a higher price”.
The directors called the timing of the revised offer by Charter Hall Retail REIT and Hostplus “opportunistic”, on the basis that the outlook for REITs is improving due to a expectations of global interest rates cuts and growing appetite for long-weighted average lease expiry assets as the interest rate cycle peaks and inflation falls.