Custodian stands by API merger as investors back away

Custodian Property Income REIT is trying to keep its agreed merger with Abrdn Property Income Trust on track after Urban Logistics REIT floated a counter-offer and the target pushed back meetings on the initial deal. In a stock market update, Custodian acknowledged that two shareholders in API that had previously said they would back a merger with Custodian have withdrawn that support. Brooks Macdonald Asset Management and Wise Funds hold a combined 4.53% of API’s issued share capital. API today said it would push back court and general meetings on the Custodian deal from the end of this month until late March, giving Urban Logistics time to complete due diligence and possibly make its own offer. Custodian chairman David MacLellan said: “We acknowledge the API board’s requirement for time to assess the potential options. We firmly believe that the rational conclusion of this assessment would be to maintain its recommendation for the all-share merger with CREI. This will benefit both sets of shareholders by creating a well-positioned REIT of enhanced scale, with the opportunity to participate in the returns from the two complementary portfolios, with a fully covered and sustainable dividend.” The company added that API’s portfolio “is highly complementary” to its own focus on income and diversification, whereas Urban Logistics “provides investors a ‘pure play’ on exposure to logistics real estate”. Urban Logistics’ proposal said a tie-up with API would “focus on the last-mile/last-touch mid-box area of UK logistics”, Custodian noted, even though more than half of API’s portfolio does not represent industrial properties. Custodian acknowledged that the share prices of both itself and Urban Logistics “have moved significantly”, changing the implied value of their respective all-share offers. “While it is acknowledged that the [Urban Logistics] offer is indicative, as at market close on 21 February 2024 the recommended merger [with Custodian] represented a premium to the [Urban Logistics] offer.” Image from Pixabay/Pexels