Capital Properties' takeover advances

The takeover of Government landlord Capital Properties looks set to proceed after predator AMP Property Portfolio won over major stakeholder Kiwi Income Property Trust by raising its takeover offer.

Portfolio general manager Stephen Costley increased its $1.42-a-share offer to $1.48 to grab Kiwi's 19.23 per cent stake.

That changed the $343.1 million offer for Capital's shares to a $357.6 million deal.

Portfolio, which held more than 16 per cent of Capital, now controls 36 per cent but is still short of the 50 per cent threshold it has set itself.

The $1.48 offer has been made to all shareholders, including those who accepted AMP's offer before the price increase.

Costley said retail investors would sell into the deal because those who bought before corporate activity started last November stood to make a 45 per cent profit.

Angus McNaughton, chief executive of Kiwi's manager, calculated Kiwi would bag a $13 million profit for its Capital shares bought in November at $1.15. Costley will pay him $69 million, which McNaughton said Kiwi would use to repay debt.

Costley vowed not to increase his offer again, but acknowledged it was at the bottom of a controversial Deloitte assessment of Capital which gave a value range of $1.48 to $1.73.

Capital chairman Tony Frankham said he would arrange an urgent meeting of Capital's independent directors to formulate an official response to the increased bid.

But he said: "I'd be more pleased if it was a higher price."

Citigroup and UBS advised selling, with UBS saying even the $1.42 price was above valuation.