Hotel Property Investments has struck a decided vote of confidence in the sector, turning its nose up at a revised takeover offer by real estate investment giant Charter Hall and sometimes partner Hostplus.
Australia’s last remaining listed pub landlord, Hotel Property Investments (ASX:HPI) holds a portfolio of 59 venues, all leased to Queensland Venue Company (QVC), the joint venture between Coles’ former Spirit Hotels and Australian Venue Co, and valued at around $1.3 billion.
In September Charter Hall Retail REIT and pension fund Hostplus joined forces to attempt a buyout of HPI at $3.65 a share, valuing the company at A$717 million.
HPI rejected the offer, on the basis it was an insufficient premium to the current share price, and amounted to nearly 10 per cent devaluing of its net tangible assets.
The company’s average share price over the prior year stood around $2.80, with a low in October 2023 of $2.53. The week following the offer saw circa 7.1 million shares bought and sold in roughly equal quantities, which was 29 times the usual daily average, implying a lot of investors thought the refusal a bad idea and a lot tipping the offer would improve.
Last week the companies boosted their bid for HPI, from A$3.65 to A$3.85 per share – an increase of 5.4 per cent, valuing it at A$756 million.
HPI shares had gained around eight per cent since the first offer. The new figure represented a further 2.4 per cent premium to Thursday’s closing price, and 10.6 per cent more than its close prior to the first offer.
Charter Hall Retail REIT (Real Estate Investment Trust) touts its interest in retail assets backed by long leases, counting shopping centres, convenience stores, childcare and petrol stations, and has come to view pubs in the same light. It became Australia’s largest pubs landlord in 2021 after teaming with Hostplus to buy the former ASX-listed ALE Group for $1.7 billion.
CHRR notes its revised offer is in fact a 17.7 per cent premium to the “undisturbed” value of HPI shares back in March, before it and Hosplus acquired nearly 15 per cent and revealed the likely direction they were taking.
The pair became HPI’s largest shareholder in March, holding a combined stake of roughly 18.5 per cent, but the takeover requires a minimum of 50.1 per cent from HPI unitholders to succeed.
This revised offer was declared to be “best and final”.
While HPI returned a prudent response that it would review the proposal, it holds its original stance and sustains its own confidence.
“The board maintains its previously stated position that there is no reason to sell the portfolio in the absence of a compelling offer.”
Trading at $3.76 on Thursday, today HPI’s share price had fallen over six per cent, to $3.53.
But bolstering its decision, following $100 million in debt refinancing, the company has reaffirmed its distribution guidance for FY25 of at least 19.7c per unit, which is a healthy 3.7 per cent increase from last year and almost exactly in line with inflation over the period.
