FLT and FCOT propose S$1.58b merger, eye 50% stake in UK business park, Companies & Markets

Mon, Dec 02, 2019 – 9:36 AM

A MERGER costing S$1.58 billion between Frasers Logistics & Industrial Trust (FLT) and Frasers Commercial Trust (FCOT) has been proposed by the managers of both real estate investment trusts (Reits). 

The proposed merger will be by way of a trust scheme of arrangement, which sees FLT acquiring all units of FCOT using a combination of cash and new units in FLT.

The enlarged Reit will hold around S$5.7 billion in assets across the Asia-Pacific, Europe and the UK – and is expected to be one of the top 10 S-Reits by market capitalisation.

It will also have greater index representation on the FTSE EPRA/NAREIT Index, the managers said on Monday in a bourse filing.

With the merger, FCOT unitholders will receive S$1.68 for each FCOT unit held, satisfied by S$0.151 in cash and 1.233 new FLT units at an issue price of S$1.24 apiece. According to the managers, this implies a 1.355 times gross exchange ratio.

For example, for every 1,000 FCOT units held, an FCOT unitholder will receive S$151 in cash and 1,233 consideration units.

This represents a premium of around 0.6 per cent, 3.5 per cent and 8.2 per cent to FCOT’s last traded price on Nov 27, one-month volume-weighted average price (VWAP) and 12-month VWAP, respectively.   

When the proposed merger is completed, sponsor Frasers Property (FPL) and its related groups are expected to own a 21.9 per cent stake of the enlarged Reit. Currently, FPL holds around 19.6 per cent interest in FLT and 25.9 per cent interest in FCOT.

In connection with the merger, the managers of FLT and FCOT are also proposing a £90.1 million (S$157.7 million) acquisition of a 50 per cent stake in Farnborough Business Park, located in UK.

Farnborough Business Park is a 46.5 hectare freehold business park situated in Thames Valley, with direct connections to key motorways and a direct train service to Waterloo Station in London.

The business park has a net lettable area of about 50,882 square metres, a committed occupancy rate of 99.1 per cent – inclusive of a new lease concluded in October 2019, and weighted average lease expiry of 6.8 years as at Sept 30.

The managers added that the proposed merger and asset acquisition is DPU (distribution per unit) accretive on a pro forma basis for both FLT and FCOT unitholders by 2.2 per cent and 4.2 per cent respectively.

Both FLT and FCOT on Nov 28 called for trading halts. Prior to the halt, FLT closed flat at S$1.24, while FCOT closed flat at S$1.67.

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