Analysts split on Dexus's chance of success in bid battle for CPA GPT's surprise $2.9 billion cash and scrip offer for Commonwealth Office Property Fund (CPA) has been welcomed by analysts as it may start a bidding war, but it has also sparked questions about the strategies of the rival bidders. CLSA analysts said today that GPT's $1.24 per security offer was compelling for CPA shareholders given the higher cash component and the quicker anticipated closing than the Dexus-Canadian Pension Plan Investment Board bid at $1.21 per security. But the brokerage noted the deal would dilute GPT's net tangible asset backing, portfolio quality and retail focus and it suggested that Dexus may have an edge. CPA is better suited for Dexus, in our view, and we believe Dexus will match GPT's offer. CPA and office A-REITs are the winners, while Dexus and GPT will likely remain under pressure during the bidding war," CLSA said. "Strategically, we view CPA as a better fit for Dexus given the latter has a larger, focused office platform, with more leasing success in recent months," CLSA said. CLSA predicted that Dexus would likely match GPT's offer and it could win the day. "Given equal bids, we believe (the trust's responsible entity board) would likely recommend the Dexus offer, which places value for management rights, while fulfilling its fiduciary responsibility," CLSA said. They said they were unsure if Dexus' partner, the Canadian Pension Plan Investment Board, was willing to increase its offer alongside Dexus. Another hurdle is that GPT can outbid Dexus as the deal offers it more earnings accretion. Moelis traders are also tipping that Dexus will match the GPT bid. "We still think that Dexus will match, followed by a further increase from GPT," Moelis said. They noted GPT's shaky track record in making corporate plays. "This will be GPT's third attempt at a takeover after failing on Australand and Lend Lease's industrial assets and we don't think they will walk away easily," Moelis said Credit Suisse analysts cautioned that it may be hard for Dexus and its Canadian partner to match the GPT bid. "We estimate that if Dexus were to match GPT's offer by increasing its cash offer by 2.7c, this would see the annualised earning per security accretion reduce from 2 to 2.5 per cent to 1.3 to 1.8 per cent and net tangible asset dilution increase from 1.9 per cent to about 2.7 per cent," Credit Suisse said. Dexus could even sell its stake in CPA into the GPT bid. We see limited scope for Dexus-CPPIB to justify any further premium. Furthermore, GPT's offer would allow Dexus to crystalise a 12.4 per cent return on its entry price of $1.13 for its 14.9 per cent stake in CPA," Credit Suisse said. Despite the hype about the takeover, the analysts were also cautious about how much extra value could be wrung out of the CPA's $3.9 billion portfolio. "Since June 30 we note that CPA have leased or agreed terms on 15 per cent of income which has resulted in CPA's weighted average capitalisation rate falling from 7.6 per cent to 7.3 per cent and 4c net tangible assets uplift," Credit Suisse said.