Tritax Big Box REIT (BBOX) and UK Commercial Property REIT (UKCM) have agreed the terms of an all-share merger to create a REIT with a market capitalisation of circa £3.9bn.
Following completion of the deal, UKCM shareholders would hold approximately 23.3% of the issued share capital of the combined group, which would be the UK’s fourth largest REIT.
Based on Tritax’s share price of 160.2p per share as at 9 February 2024, the offer implies a value of 71.1p per UKCM share and approximately £924m for the entire issued share capital of UKCM, which represents a premium of 10.8% to UKCM’s closing share price of 64.2p per share on 9 February 2024.
The boards of the two REITs said there was a “compelling strategic and financial rationale” for the merger, which would “bring together complementary logistics-oriented investment portfolios with a shared focus on resilient and growing income”.
The merger would create a REIT with a circa £6.3bn portfolio of UK logistics assets generating more than £290m in rent per annum.
The board of UKCM has confirmed to Tritax that, should a firm offer be made on the financial terms of the possible offer, the board of UKCM – excluding chair Peter Pereira Gray – is minded to recommend it to shareholders.
Andrew Saunders, equity research analyst – real estate at Shore Capital, described the proposed merger as a sensible move. “This deal looks to make good sense to us and we see the BBOX share price offering attractive long-term value. BBOX offers a strong value-creating development pipeline with the company guiding to 2-3m sq ft of new space per annum – suggesting the outlook for continued rental growth and development upside looks promising. With an existing secure balance sheet and available liquidity in excess of £500m (excluding UKCM), BBOX also has the financial headroom to deliver this future development. We reiterate our buy recommendation.”
Matt Saperia, an analyst at Peel Hunt, added: “We remain supportive of M&A within the sector, and this seems a logical deal. Both portfolios are focused on logistics, the managers share common ownership and the deal should lead to cost synergies, although perhaps they would be higher in an internal vehicle?”
