Tritax Big Box and UKCM agree £4bn merger

Tritax Big Box and UK Commercial Property REIT have agreed terms for an all-share merger which would create the UK’s fourth largest REIT. The all-share deal, confirmed this morning, will lead to a market capitalisation of £3.9bn and a shed-led portfolio valued at £6.3bn. UKCM’s portfolio is expected to contribute £1.3bn to the total value. The proposed deal will be at an exchange ratio of 0.444 Big Box shares for each UKCM share, and would result in UKCM shareholders holding 23.3% of the issued share capital of the enlarged company. The terms imply a value of 71.1p per UKCM share and approximately £924m for the entire issued share capital of UKCM. This represents a premium of 10.8% to UKCM’s closing share price of 64.2p per share on Friday and a premium of 23% to its six-month volume weighted price of 57.8p. In a statement confirming the agreement, the REITs said the deal would “bring together complementary logistics-oriented investment portfolios with a shared focus on resilient and growing income”. It added that it would also “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”. Tritax develops and owns larger units, while UKCM has a much broader range. The REITs said the deal would provide additional scope for asset management and capital recycling, creating a £6.3bn portfolio generating rental income of more than £290m per annum, with “significant embedded and growing rental reversion potential”. Phoenix Life, UKCM’s largest shareholder, has given the union its blessing, signing a letter of intent. The insurance consolidator, which owns just over 43% of the FTSE 250 REIT, was instrumental in scuppering UKCM’s plan to merge with Picton in November last year, after it rejected the deal. Investec, which holds just over 13% of UKCM’s shares, has also approved the Tritax Big Box deal. The letters of intent from both investors means that 56.5% of shareholdings are already on side if a firm offer is made by Tritax. Photo from Tritax Big Box