Custodian Property Income REIT and Abrdn Property Income Trust have agreed terms on a £1bn all-share merger.
Under the terms, Custodian will acquire the entire issued and to be issued share capital of API for £237m, with 0.78 Custodian shares offered in exchange for each API share.
Following completion of the merger, existing Custodian shareholders will hold approximately 60% of the enlarged group, and API shareholders approximately 40%.
The deal represents a 29% premium to last night’s API closing price of 48p. It is a 23% premium to the one-month average and 26.5% to the three-month average.
The merger will create a “substantially larger portfolio” of 200 assets, valued at more than £1bn.
It will also unlock “meaningful reversionary potential” with the combined ERV of £84.3m exceeding the combined passing rent of £68.1m by 24%, at 31 December 2023.
The boards also expect to make in excess of £3m in savings.
The REIT said the aim would be to move the enlarged group to the FTSE 250 index in due course.
Custodian chair David MacLellan said: “This transaction creates a well-positioned REIT of significant scale, giving the combined group’s shareholders the opportunity to participate in the returns from the complementary API and CREI portfolios, with a fully covered and sustainable dividend and a focus on ESG.”
API chair James Clifton-Brown added: “The merger will enable API shareholders to retain exposure to the portfolio and its growth prospects at a significant premium to API’s share price, with the prospect of superior share liquidity and an enhanced and fully covered dividend. The API board believes that, with increased scale and an enhanced capital structure, the combined group will be well positioned for the future. The API board is therefore pleased to recommend the merger to API shareholders.”
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