"The Boards of Tritax EuroBox and SEGRO have announced that they have reached agreement on the terms of a recommended all-share offer by SEGRO for the entire issued and to be issued share capital of Tritax EuroBox.
It is intended that the Transaction will be implemented by way of a court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006. The purpose of the Scheme is to enable SEGRO to acquire the whole of the issued and to be issued share capital of Tritax EuroBox.
Under the terms of the Scheme, which will be subject to the Conditions and other terms set out in the full announcement and to the full terms to be set out in the Scheme Document, Tritax EuroBox Shareholders will be entitled to receive:
For each Tritax EuroBox Share: 0.0765 New SEGRO Shares (the "Exchange Ratio")
In addition, Tritax EuroBox Shareholders will be entitled to receive and retain a dividend of 1.25 cents per share (equivalent to approximately 1.05 pence per share at the current exchange rate) in respect of the quarter ending 30 September 2024, to be announced, declared and paid prior to the Effective Date to Tritax EuroBox Shareholders who are on the register at the relevant record time in relation to such dividend (the "Tritax EuroBox Fourth Interim Dividend"), the aggregate value of the New SEGRO Shares to be issued pursuant to the Exchange Ratio and the Tritax EuroBox Fourth Interim Dividend together being the "Transaction Value".
For the avoidance of doubt, as set out in more detail in the full announcement, Tritax EuroBox Shareholders will also continue to be entitled to receive and retain the previously declared Tritax EuroBox Third Interim Dividend.
Based on the closing price per SEGRO Share of 880.0 pence as at 3 September 2024 (being the last Business Day prior to the date of this announcement), the Transaction Value values each Tritax EuroBox Share at 68.4 pence, equivalent to approximately 81.1 cents at the current exchange rate, representing:
- a premium of approximately 27 per cent. to the closing price per Tritax EuroBox share of 53.8 pence as at 31 May 2024, being the last Business Day prior to the commencement of the current Offer Period (the "Undisturbed Date");
- a premium of approximately 27 per cent. to the volume-weighted average price per Tritax EuroBox share of 53.8 pence for the 3-month period prior to the Undisturbed Date;
- a discount of approximately 14 per cent. to Tritax EuroBox's last reported IFRS NAV and EPRA NDV per share of 93.9 cents as at 31 March 2024; and
- an implied Topped-up Net Initial Yield of 5.2 per cent.
On the basis set out above, the Transaction Value values the entire issued and to be issued ordinary share capital of Tritax EuroBox at approximately £552 million (approximately €654 million at the current exchange rate) which, based on Tritax EuroBox's net debt as at 31 March 2024, implies an enterprise value of approximately £1,101 million (approximately €1,306 million at the current exchange rate).
In addition, based on the volume-weighted average prices per SEGRO Share of 881.7 pence and 895.8 pence for the 1-month and 3-month period prior to 3 September 2024, the Transaction Value values each Tritax EuroBox Share at 68.5 pence and 69.6 pence respectively, equivalent to approximately 81.3 cents and 82.5 cents respectively at the current exchange rate, representing:
- premia of approximately 27 per cent. and 29 per cent. respectively to the closing price per Tritax EuroBox share of 53.8 pence as at the Undisturbed Date;
- premia of approximately 27 per cent. and 29 per cent. respectively to the volume-weighted average price per Tritax EuroBox share of 53.8 pence for the 3-month period prior to the Undisturbed Date;
- a discount of approximately 13 per cent. and 12 per cent. respectively to Tritax EuroBox's last reported IFRS NAV and EPRA NDV per share of 93.9 cents as at 31 March 2024; and
- an implied Topped-up Net Initial Yield of 5.2 per cent. and 5.2 per cent. respectively.
On the basis set out above, the Transaction Value values the entire issued and to be issued ordinary share capital of Tritax EuroBox at approximately £553 million and £561 million respectively (approximately €656 million and €666 million respectively at the current exchange rate) which, based on Tritax EuroBox's net debt as at 31 March 2024, implies an enterprise value of approximately £1,102 million and £1,111 million respectively (approximately €1,307 million and €1,318 million respectively at the current exchange rate).
Immediately following the Effective Date, it is expected that SEGRO Shareholders will own approximately 96 per cent., and Tritax EuroBox Shareholders will own approximately 4 per cent., of SEGRO's enlarged issued share capital.
Highlights
The Boards of Tritax EuroBox and SEGRO believe that the Transaction is a compelling opportunity for shareholders in both companies, delivering a significant uplift in value for Tritax EuroBox Shareholders and adding a portfolio of well-diversified and high-quality logistics assets to SEGRO's portfolio on attractive terms.
Since the commencement of the Offer Period on 3 June 2024, the Board of Tritax EuroBox has received and / or solicited expressions of interest regarding a potential sale of Tritax EuroBox from a number of different parties. The Board of Tritax EuroBox has carefully reviewed and negotiated a range of proposals, which included offers for the Company in shares or cash, or the acquisition of the Company's assets (in whole or in part) for cash. The Board of Tritax EuroBox has compared the proposals both to one another and to Tritax EuroBox's standalone prospects, as well as the strategic options considered by the Board of Tritax EuroBox as part of a review in April 2024 (which included, but were not limited to, a potential managed wind-down and a significant share buyback programme funded by disposals, and have been kept under constant review during the Offer Period).
On the basis of this comprehensive assessment, the Board of Tritax EuroBox believes that the Transaction with SEGRO represents a compelling opportunity for Tritax EuroBox Shareholders to achieve a significant and immediate uplift in the value of their investment with the prospect of stronger total shareholder returns and optionality by virtue of enhanced liquidity. By exchanging their shares in Tritax EuroBox for shares in SEGRO, Tritax EuroBox Shareholders would have the option either to:
- retain exposure to the European industrial and logistics sector, through holding shares in the largest and most liquid REIT in Europe, while benefiting from further upside potential from a recovery in market conditions, exposure to an active development programme and the value creation resulting from the Transaction; or
- sell their New SEGRO Shares for cash, taking advantage of SEGRO's significantly greater liquidity, due to SEGRO's £11.9 billion market capitalisation, 100 per cent. free float, primary listing on the London Stock Exchange with a secondary listing on Euronext Paris, and membership of the FTSE 100.
Both SEGRO and Tritax EuroBox have pursued a strategy based on owning prime assets in Europe's major logistics hubs and along key transportation corridors, where occupier demand is most resilient. SEGRO believes that Tritax EuroBox's assets, most of which are located in SEGRO's existing core markets, will complement SEGRO's Continental European big box portfolio (including those assets managed under the SELP joint venture) and strengthen this part of its business. The Tritax EuroBox portfolio has strong income and growth characteristics, which align well with SEGRO's own investment objectives. In addition to the 5.2 per cent. implied Topped-up Net Initial Yield at which SEGRO is acquiring the Tritax EuroBox assets, SEGRO expects to internalise the management of the portfolio through termination of the existing Investment Management Agreement with the Manager, utilising its existing operating platform to manage Tritax EuroBox's properties in its current geographies. It is also expected that there will be additional cost savings from the removal of other corporate expenditure associated with Tritax EuroBox currently being an independent listed entity.
SEGRO also expects to continue to benefit from a strong balance sheet. SEGRO has reached an agreement with the USPP Noteholders to waive their change-of-control rights and roll the €200 million USPP Notes issued by Tritax EuroBox into SEGRO with SEGRO becoming a parent guarantor of such USPP Notes. In addition, the €500 million Green Bonds issued by Tritax EuroBox will roll into SEGRO on their existing terms. Based on the amended terms of the USPP Notes, SEGRO will assume Tritax EuroBox's existing debt at an attractive weighted average cost of debt of 1.5 per cent. with a weighted average maturity of 3 years. Following the Effective Date, SEGRO expects no significant change to its leverage position, with pro forma LTV expected to continue to be approximately 30 per cent.
SEGRO expects the Transaction to be accretive to both EPRA NTA per share and adjusted earnings per share immediately following the Effective Date.
The Scheme is expected to become effective before the end of the calendar year.
Recommendation
The Tritax EuroBox directors, who have been so advised by Lazard, Barclays and Jefferies as to the financial terms of the Transaction, consider the terms of the Transaction to be fair and reasonable. In providing their advice Lazard, Barclays and Jefferies have taken into account the commercial assessments of the Tritax EuroBox directors. Lazard is providing independent financial advice to the Tritax EuroBox directors for the purposes of Rule 3 of the City Code.
Accordingly, the Tritax EuroBox directors intend unanimously to recommend that Tritax EuroBox Shareholders vote in favour of the resolutions relating to the Transaction at the Meetings (or in the event that the Transaction is implemented by way of an Offer, to accept or procure acceptance of such offer) as the Tritax EuroBox directors have irrevocably undertaken to do in respect of their own beneficial holdings (and the beneficial holdings of their close relatives and related trusts) as described below.
Irrevocable Undertakings
Taking into account the irrevocable undertakings from each of the Tritax EuroBox directors who hold Tritax EuroBox Shares, SEGRO has received irrevocable undertakings to vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the Tritax EuroBox General Meeting (or, in the event that the Transaction is implemented by an Offer, to accept (or procure the acceptance of) such Offer) in respect of a total of 612,494 Tritax EuroBox Shares representing, in aggregate, approximately 0.08 per cent. of Tritax EuroBox's issued share capital on 3 September 2024 (being the last Business Day prior to the date of this announcement).
Further details of these irrevocable undertakings are set out in Appendix 3 to this announcement.
Commenting on the Transaction, David Sleath, the Chief Executive of SEGRO, said:
"This transaction offers the opportunity to acquire a high quality portfolio of big box warehouses in core European markets which would complement and enhance our existing assets. The management of the portfolio will be internalised on completion, taking advantage of economies of scale from our existing, locally-based operating platform.
"We intend to apply the long-established SEGRO strategy of disciplined capital allocation and operational excellence, based on an efficient and resilient corporate and capital structure and the Responsible SEGRO principles as we do for all assets we own and manage. While shareholders can expect this approach to lead to some capital recycling, we recognise the high quality of the portfolio assembled by the Manager and look forward to working with it for the benefit of our new and existing shareholders."
Commenting on the Transaction, Robert Orr, the Chair of Tritax EuroBox, said:
"As set out at Tritax EuroBox's half-year results in May this year, the Board has been focused on how best to deliver value for Tritax EuroBox shareholders in an effective and efficient manner. The Board would like to thank the Manager for the important role it has played in curating and managing Tritax EuroBox's high-quality asset base, and actively managing the portfolio in order to achieve the best outcome for shareholders in the context of a difficult macroeconomic environment for the property sector.
"The transaction with SEGRO represents a compelling opportunity for Tritax EuroBox shareholders to achieve a significant and immediate uplift in the value of their investment and stronger total shareholder returns, with the option either to retain exposure to the European industrial and logistics sector through holding shares in the largest and most liquid REIT in Europe, or to sell their New SEGRO Shares for cash, taking advantage of SEGRO's significantly greater trading liquidity. The Board is pleased to recommend the Transaction to Tritax EuroBox Shareholders."
