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Will Blackstone increase its bid for IOF?

The recent Blackstone bid for Investa Office Fund (ASX: IOF) is looking to come under fire as updated valuations, released in the past week, suggest a 10.7% increase in the NTA of IOF. The NTA is estimated to increase to $5.48 per unit at June 2018 (from $4.95 at 31 December) as the Fund independently revalued its 20 office properties.

The increase in NTA will place pressure on Blackstone to increase it’s bid of $5.1485 per unit (being $5.25 less the recent distribution of $0.1015), a 6% discount to the updated NTA. Current shareholder, APN Property, announced that it intends to reject Blackstone’s current offer and would prefer a price around $5.60 per unit.

At the moment, the market seems to be valuing IOF somewhere between Blackstone’s offer and APN’s price, with IOF currently trading in the $5.20 - $5.30 range.

Our thoughts are that this seems reasonable as, in the absence of a rival bidder, Blackstone can afford to hold back a bit, whilst recognising that it may need to increase its price by some amount in order to get the necessary votes across the line.