- Offer represents 10.8 per cent premium to UKCM share price
- Both boards and UKCM's largest shareholders approve
The great real estate investment trust (Reit) roll-up continues. Tritax Big Box (BBOX) has agreed to snap up UK Commercial Property (UKCM) for £924mn to create the UK's fourth-largest Reit.
Both boards have agreed to the all-share takeover, which follows a spate of merger and acquisition activity among UK Reits as discounts to net asset value persist. Valuations have been low since interest rates started climbing.
The 71.1p indicative offer from Tritax, first reported by property website React News on Friday, represents a 10.8 per cent premium to UKCM's share price before the announcement and a 9.66 per cent discount to UKCM's 78.7p net tangible asset value. UKCM shareholders would own 23.3 per cent of the combined company, and Tritax shareholders the rest. It would comprise of £6.3bn in mostly logistics assets and have a £3.9bn market cap, although an analyst questioned the value of UKCM's non-logistics properties to Tritax shareholders.
Phoenix Life and Investec, which respectively own 43.4 per cent and 13.1 per cent UKCM, have agreed to the deal in principle after the former rejected a reverse-takeover offer from Picton (PCTN), a much smaller Reit. Tritax must announce a firm intention to make an offer by 8 March under Takeover Panel rules.
The boards said the merged company would "enhance the overall customer offering through a high-quality logistics portfolio across a broader range of property sizes and tenant uses, from 'mega-Boxes' to smaller, strategically located, logistics assets within key urban locations".
John Cahill, a real estate analyst at Stifel, said the deal shows Tritax Big Box is "increasigly mov[ing] away from its original core focus on big boxes".
"Although we are generally positive on the strategy of Reit growth through merger within the listed space, there will nevertheless be some obstacles to be overcome," he added.
"It may well be that 60 per cent of the portfolio is logistics, but 40 per cent comprises a diverse selection of other assets which would be non-core to Tritax. This will all have to be dealt with.
"Following the announcement of the LMP and LXi merger, the bar has now been set high."
