CROMWELL Property Group (ASX:CMW) has accused the responsible entity for Investa Office Fund (ASX:IOF) of acting unreasonably, and deliberately frustrating the Brisbane-based company's efforts to place a second bid for the fund.

In late November, Investa Listed Funds Management Limited (ILFML), which is the responsible entity for IOF, rejected Cromwell's $2.7 billion, $4.45 per share bid for the fund.

Investa Commercial Property Fund (ICPF) acquired the Investa Office Management Platform (which included ILFML) from Morgan Stanley Real Estate Investing in March 2016.

ICPF is also looking to increase its holding in IOF. It already owns a 8.94 per cent in the fund, and it made a private bid for Cromwell's 9.83 per cent stake in the company the same day IMFL terminated discussions with Cromwell.

The convoluted ownership and management structure of IOF has led Cromwell to claim ICPF has a privileged position that is creating a conflict of interest between the management of IOF and its shareholders.

In a press release today, Cromwell says it has consistently been rebuffed in seeking access to additional information from the ILFML board to reassess its offer price for IOF.

"Those efforts have been continually frustrated by the Board of ILFML, which has unreasonably and unusually refused access to the minimal level of information needed for Cromwell to consider and submit a revised offer," says Cromwell.

"The IOF responsible entity seems determined to frustrate Cromwell's ability to submit a revised offer."

Cromwell believes there is no justifiable reason for it to do so, especially when the ILFML Board has tabled its own internalisation agenda, and there has been media speculation of a privatisation proposal by ICPF.

The company is pointing to a conflict of interest between IOF's members and ICPF's interests, saying ICPF enjoys a privileged position, and IOF and ICPF are parties to a deal which could result in ICPF receiving around $45 million for the sale of 50 per cent of its stake in Investa Office Management (IOM) to IOF.

"Cromwell believes that an independent responsible entity, free from any conflicting interests, should be keen to ensure a competitive, informed and efficient market and secure a compelling proposal in the best interest of all securityholders of IOF.

"ILFML's actions effectively work to close off this option."

Cromwell says it would have been prepared to enter confidentiality agreements for the "limited" information it has requested, but there is an impasse over the terms of the agreement.

"IOF and its advisers have consistently delayed, and insisted on unreasonable and uncommercial fetters to the provision of any information. Importantly, those restrictions preclude a level playing field in the event of a competing offer, in particular if a privatisation proposal from ICPF eventuates," says Cromwell.

"Cromwell is simply not prepared to enter into arrangements that precludes it from reacting to any action which would increase ICPF's ability to block proposals from Cromwell or any other party, a clear concern given ICPF's purchase in November 2016."

Investa is undertaking a review in response to the governance concerns, but has not updated the market on its outcome.

"We struggle to see how ILFML's conduct is consistent with acting in the best interests of IOF securityholders as a whole and does not give preference to ICPF, or any sale of a 50% stake in IOM," says Cromwell.

"That IOM and ICPF are owned by institutions which insist upon the highest level of corporate governance seems to be inconsistent with the actions of the Board of its wholly owned subsidiary (ILFML)."

The chairman of ILFML has not been available to talk to Cromwell in the past week.

"As the largest securityholder of IOF, Cromwell believes that ILFML should ensure a fully informed and efficient market with a level playing field. Its failure to do so is a breach of its fiduciary obligations. Cromwell remains committed to working co-operatively with IOF to resolve this matter to the mutual benefit of all IOF securityholders.

TIMELINE (according to Cromwell)

7 March 2016 ICPF acquires Investa Office Management Platform, including ILFML, as responsible entity of IOF from Morgan Stanley Real Estate Investing.

14 November 2016 Cromwell submits a bona fide indicative non-binding but fully funded all cash offer for IOF at $4.45 per IOF security subject to usual conditions including due diligence and foreign investment approval.

21 November 2016 in support of our bona fides Cromwell supplemented our proposal with letters of support from third party debt and equity providers.

29 November 2016 despite Cromwell's attractive and compelling proposal, and Dexus having previously been granted due diligence for its offer, ILFML informs Cromwell that as RE they would no longer engage with Cromwell and its information requests.

29 November 2016 ICPF announces it has acquired 8.94% stake in IOF at $4.23 per security from a company owned by funds managed by Morgan Stanley Real Estate Investing and that it is progressing discussions on the terms on which IOF might acquire a 50% interest in IOM.

13 December 2016 ILFML announces that any decision on the potential acquisition of 50% of IOM will be taken as part of an operational and governance review on how IOF will work with IOM

13 December 2016 - 2 February 2017 Cromwell seeks to agree access to limited information on reasonable terms. During this time the Chairman of ILFMLas frequently unavailable to discuss the proposal from Cromwell.

3 February 2017 IOF announces to the market that it has been unable to agree arrangements to enable Cromwell to access information.

Business News Australia

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