Morgan Stanley's real estate unit agreed to buy Australia's Investa Properties for A$4.7 billion (US$3.9 billion) on Thursday, the nation's third-largest property trust takeover.
Morgan Stanley Real Estate offered A$3.08 for each Investa share, its second major acquisition in the past week.
Investa shares, which have already risen 50% in the past year on takeover speculation, jumped 15.2% to A$3.10. Investa said its board had recommended the offer.
The offer would be reduced by an expected 8 cent distribution for the half-year ending June 30, it said. The offer valued Investa at A$6.6 billion including debt.
Morgan Stanley, which agreed on May 22 to buy U.S.-based Crescent Real Estate Equities for US$2.3 billion, said the deal was part of its strategy to increase the investment bank's long-term presence in Australia.
"Investa's portfolio, with its attractive assets in Australia's major cities, is a natural extension of our global real estate investing strategy," Morgan Stanley Australia Chief Executive Steven Harker said in a statement.
Analysts said the deal would give Morgan Stanley control of Investa's commercial property portfolio in Sydney and Melbourne which have benefited from a surge in rental prices, but it would be keen to sell-off its lagging residential division.
"I'm assuming Morgan Stanley or whoever buys the company will look to divest some of the portfolio quickly, perhaps sell off some of their office properties in the United States," said one analyst who did not want to be named.
No Divestment Plans
However, Investa Chairman Steve Crane told reporters on a conference call there were no plans to sell-off businesses or reduce staff.
He declined to say whether Investa had received approaches from any other parties but said Investa had been in talks with Morgan Stanley since the end of March.
Investa is a diversified property company with A$7 billion in assets under management, including an Australian commercial office portfolio of A$4 billion.
Rumors of a potential takeover of Investa swept through the market last year. A successful deal would be the third-largest Australian property trust takeover following acquisitions by Westfield Holdings and Macquarie Goodman Management in 2004, according to figures from Dealogic.
It would be the largest acquisition of an Australian property trust by an offshore company, and the ninth globally for the year to date.
Analysts said Australian real estate investment trusts (REIT) were ripe for takeovers, particularly from private equity.
"The Australian REIT market is ripe for private equity leverage buyouts. It's an English-speaking market, transparent has a good legal framework, and is mature," John Kriz, managing director, real estate finance at Moody's.
Morgan Stanley said earlier this month it has acquired US$121.5 billion of real estate assets worldwide since 1991 and that it also manages US$55.6 billion in real estate assets on behalf of its clients.