The boards of Tritax Big Box and UK Commercial Property REIT have reached agreement on a £924m all-share merger deal.
The takeover, agreed last month, will create the fourth largest UK REIT with a combined value of around £4.4bn.
Tritax BBOX said in a joint statement that UKCM’s £475m non-logistics portfolio offered “attractive asset management and capital recycling opportunities”. It also cited potential for 39% rental reversion within UKCM’s £740m logistics properties, and 24% across its overall portfolio.
Immediate cost savings of around £4m per annum were also identified.
Under the terms of the deal, UKCM shareholders will get 0.444 new Tritax BBOX shares for each UKCM share.
UKCM chairman Peter Pereira Gray is not recommending the takeover, but accepted that the proposed merger should be put to shareholders.
He believed an orderly liquidation would produce a higher net return for shareholders than the offer price, but acknowledged that a merger with Tritax BBOX could deliver higher value to UKCM shareholders over time.
Pereira Gray also believed other parties would have stepped forward if there was a “more open and comprehensive sales process”.
Aubrey Adams, chairman of Tritax BBOX, said: “UKCM has assembled a high-quality logistics-oriented portfolio with a South East and Midlands focus and significant embedded rental reversion potential, all characteristics which are complementary to BBOX’s current portfolio.
“The combination grows BBOX’s exposure to ‘last mile’ and urban logistics assets which have the potential to enhance returns of the existing portfolio.”
Margaret Littlejohns, senior independent director of UKCM, said: “The UKCM recommending directors believe this transaction allows all UKCM shareholders to benefit from continued investment in a REIT, but with significantly larger scale and improved share liquidity, as well as addressing the factors we believe have contributed to the persistent discount at which UKCM’s shares have traded for many years.
“The combined business will be invested in a high-quality UK logistics portfolio, where BBOX has a strong track record of delivering attractive, sustainable returns which will drive improved earnings for UKCM shareholders and support a fully covered dividend.
“By combining the businesses on an EPRA NTA-to-EPRA NTA basis, shareholders will be able to share fully in the future potential valuation upside whether that is delivered from asset management initiatives, rental growth, the potential of the BBOX development pipeline or a broader improvement in real estate sector sentiment.”
Shares in Tritax BBOX were trading up by nearly 1.9% this morning, while UKCM shares were up 4%.
Photo © Gerd Altmann/Pixabay
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