M&A alarm bells ring at Hotel Property Investments, 360 Capital...

M&A alarm bells ring at Hotel Property Investments, 360 Capital buys in
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Tony Pitt’s 360 Capital has built a 10 per cent-plus stake in ASX-listed pubs owner Hotel Property Investments, in a move that’s likely to put the hotel landlord in play.

Stockbroker Morgans has been bidding HPI’s big institutional investors on behalf of an unnamed client in the past week, and has managed to get its hands on what appears to be about 30 million shares or 15 per cent of the company.

360 Capital is understood to be the buyer. Its executive chairman and founder Tony Pitt declined to comment on Monday afternoon.

The buying started last Tuesday, when the investor bought a 4.99 per cent stake, and stepped up on Friday when it got its hands on what looks to have been about another 7 per cent.

The second piece of buying was at $3.67 a share - and is also about where HPI was trading on Monday afternoon. The stock’s up 15 per cent in the past five days.

Fund manager Alceon’s Alceon Liquid Strategies Pty Ltd was among the sellers, as shown by two substantial shareholder notices in the past week. HPI’s other big investors include Yarra Capital and Vanguard Australia, according to its annual report in August.

The move has all hallmarks of a 360 Capital play: HPI’s a big enough target trading at a substantial discount to book value, there’s a sizeable pre-bid stake, and a company that the market’s largely left behind.

360 Capital made similar moves on office and industrial property owner Irongate this time last year (now owned by Charter Hall and Dutch fund PGGM) and Asia Pacific Data Centre Group in 2018.

The trading’s sure to have alarm bells ringing at HPI, which listed in December 2013 and is worth nearly $1.2 billion including debt. It has historically turned to E&P Corporate Advisory for defence, while JPMorgan was also involved in its equity raising last year.

Should 360 Capital be confirmed as the buyer - which is likely to happen on Tuesday given regulations around substantial shareholder notices - it’s likely to put HPI in play. Pitt told his investors last month that the company was in its strongest cash position in its 16-year history and looking to invest.

360 Capital doesn’t always move on its prey straight away, but it generally strikes at some point, which will put HPI on the radars of other potential buyers.

HPI had 62 properties worth $1.29 billion at June 30, most of which were leased to KKR’s Australian Venue Co or AVC’s joint venture with Coles Ltd. NTA was said to be $4.19 a security at June 30.

HPI securities finished at $3.73 on Monday.