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If the proposed deal pushes through, Frasers Property (FPL) and its related groups are seen to own a 21.9% stake of the merged Reit.
The managers of real estate investment trusts (REITs) Frasers Commercial Trust (FCOT) and Frasers Logistics & Industrial Trust (FLT) have proposed to merge both companies together in a deal close to S$1.58 billion, reported The Business Times.
The deal will be made under a trust scheme of arrangement, where FLT acquires all units of FCOT for around S$1.54 billion.
Part of the S$1.58 billion merger includes a S$1.54 billion scheme consideration, the S$11.2 million acquisition fee, as well as S$35 million covering professional and other fees.
FLT will pay the scheme consideration through a mix of cash and the issuance of new FLT units to FCOT unitholders.
Each FCOT unit held will give FCOT unitholders S$0.151 in cash and 1.233 new FLT units at a S$1.24 issue price. This translates to FCOT unitholders being paid a scheme consideration of S$1.68 per FCOT unit held, implying a gross exchange ratio of 1.355 times.
This represents a premium of about 0.6%, 8.2% and 3.5% to FCOT’s last traded price on 27 November, 12-month volume-weighted average price (VWAP) and one-month VWAP respectively.
If the proposed deal pushes through, Frasers Property (FPL) and its related groups are seen to own a 21.9% stake of the merged Reit.
Other FCOT unitholders are predicted to hold 24.6%, with other FLT unitholders expected to get 53.5%.
The merged Reit will have an estimated S$5.7 billion in assets across the UK, Europe and the Asia-Pacific and is seen to be one of the top S-Reits by market capitalisation. Its portfolio will have about 2.6 million sq m of space with around 300 tenants in 98 properties in five countries.
When the merger happens, FLT’s manager will manage the enlarged Reit. Its exposure to any single asset will be at a maximum of 12% by value.
The managers also said that the proposed merger and asset acquisition is DPU (distribution per unit) accretive under a pro forma basis for both FCOT and FLT unitholders by 4.2% and 2.2% respectively.
According to Robert Wallace, chief executive of FLT’s manager, the merger will enhance the financial capacity and flexibility to pursue acquisitions and right of first refusal pipeline exceeding S$5 billion.
“We will be in an even stronger position to pursue growth and continue to deliver long-term value to our unitholders,” he said.
Upon the news of the merger, FLT units grew 3.2% or four Singapore cents to S$1.28 around two hours after trading resumed at the counter, before closing flat at S$1.24.
FCOT units grew 3.3% or 5.5 cents to S$1.725, and lost some gains to close at S$1.71, 2.4% or four cents higher.
“The enlarged Reit will benefit from size, scale, diversification, greater debt headroom and bigger acquisition pipeline. Though it’s a win-win for both, we believe the deal benefits FCOT unitholders more as the smaller size of the Reit was limiting its growth potential,” said Vijay Natarajan, RHB analyst.
Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email victorkang@propertyguru.com.sg
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