Two London-listed real estate investors are under pressure to restart £3bn merger talks that were abandoned in recent weeks.
LXi REIT and Secure Income REIT held what LXi’s board called “very preliminary discussions” about a potential merger, although LXi said earlier this month that it is “no longer reviewing this opportunity”.
Some investors are now calling for a more in-depth explanation of why the discussions ended, with an eye to them being resumed. One fund manager told EG: “What about this transaction is not in in the interest of shareholders? It strikes me that this transaction has huge industrial logic. In the world of listed companies, scale and liquidity are crucial.”
City AM reported that some shareholders were “furious” they weren’t consulted over the deal, and that the talks fell apart after LXi chairman Stephen Hubbard learned he would not chair the combined company. LXi denies that is the reason for the talks being terminated.
When LXi confirmed the discussions had ended, analysts covering the REITs’ stocks said a deal could hold promise.
Analysts at Numis wrote: “We do not know the extent of the discussions and [it] appears they were very early stage, nevertheless it is interesting to see potential discussions between two of the largest funds within our property investment companies universe.
“We believe both funds have high-quality management teams and the attraction of the underlying assets held within the portfolios of listed real estate and listed infrastructure universes has been highlighted by a number of private equity buyers in the space.”
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