Listed pub landlord Hotel Property Investments’ shareholders have voted with their balance sheets to accept the protracted, $760 million attempted takeover by Charter Hall and Hostplus.
HPI (ASX:HPI) holds a stable of pubs in multiple states, totalling around 60 sites. The majority are leased to AVC and its partnership with Coles, QVC (Queensland Venue Co).
Bidding by the partnered real estate giant and super fund began in September, but this was shunned and a revised offer declared ‘best and final’ stood to pay HPI shareholders $3.79, valuing the company at around $757 million.
Charter and Hostplus are the biggest owners of pubs in Australia, having bought out ALE Group for $1.7 billion in 2021.
HPI’s board again rejected the offer, explaining that it undervalued the company and its growth strategy, outlined by managing director John White in Melbourne in November.
White offered that the bid was below what they see as the value and potential of the $1.3 billion portfolio. Brought on as part of HPI’s growth strategy, to “unlock value”, he spoke of a plan to “sweat assets harder” by improving operations, increasing appeal, diversifying, and via “adjacent income”.
HPI’s investor appeal remained strong, having maintained debt at the lower end of targeted gearing, and disclosing that it is in diligence to purchase up to six assets, totalling around $75 million.
The takeover offer remained at $3.785 per security, although decreased to $3.752 for those who took the deal after 1 January.
HPI’s share price hit $3.78 on 7 December and stayed there, and by the middle of the month the bidders claimed victory, having received more than 50 per cent in acceptances, and gaining a controlling stake.
The board of HPI continued its position that the deal was not “compelling” and still undervalued the company, but two days after the declaration it capitulated and advised shareholders to sell.
With the endorsement came warning that the new controlling companies intend “to be active major security holders” and will conduct a review of both HPI’s portfolio and management, distributions and policies. It was noted that decision-making might change and that failure to sell “could be detrimental” to minority investors.
Charter Hall chief executive David Harrison has stated their intention to reach the 90 per cent benchmark for a compulsory acquisition, which gives them the power to forcibly acquire the securities of minor shareholders.
Capping last week, the bidders held voting power and 66.7 per cent of the share register.
A supplemental bidder’s statement detailed that the offer would close 31 January, after which the share price may fall. Minor investors may also see reduced liquidity in HPI securities, which could reduce their ability to sell.
The bidders hold up their new ability to pass ordinary resolutions, control the composition of the Board, and to influence strategy relating to operations, capital management and distributions.
Tuesday saw the new owners notch up 139.7 million shares, representing 71.09 per cent of the register. In February two directors will be replaced by two nominated by Charter Hall and Hostplus.
HPI MD John White is pragmatic about the future of the company, which may be de-listed from ASX. He says that with the Board’s support he will continue his recently outlined approach unless or until directed otherwise.
“The management team and I are diligently managing the company as usual,” he advised PubTIC.
“We continue to focus on shareholder value by working with AVC on our pub refurbishment and redevelopment program and executing the strategy I outlined at the AGM.”
