The following information was provided to the Stock Exchange…
“The Boards of Tritax Big Box REIT PLC ("BBOX") and UK Commercial Property REIT Limited ("UKCM") are pleased to announce that they have reached agreement on the key terms of a possible all-share offer (the "Possible Offer") for the entire issued and to be issued share capital of UKCM at an exchange ratio of:
0.444 new ordinary BBOX shares per UKCM share
(the "Exchange Ratio")
The Exchange Ratio is on an EPRA NTA for EPRA NTA basis with reference to BBOX's 31 December 2023 unaudited EPRA NTA of 177.2 pence per share and UKCM's 31 December 2023 unaudited EPRA NTA of 78.7 pence per share.
The Possible Offer would result in UKCM shareholders holding approximately 23.3 per cent. of the issued share capital of the enlarged company (the "Combined Group").
Based on BBOX's share price of 160.2 pence per share as at 9 February 2024, the Possible Offer implies a value of 71.1 pence per UKCM share and approximately £924 million for the entire issued share capital of UKCM, which represents:
- a premium of 10.8 per cent. to UKCM's closing share price of 64.2 pence per share on 9 February 2024; and
- a premium of 23.0 per cent. to UKCM's 6 month volume weighted average share price of 57.8 pence per share as at 9 February 2024.
Strategic Rationale
The Boards of BBOX and UKCM believe that the Possible Offer has compelling strategic and financial rationale, building on BBOX's existing strategy. Specifically, the Possible Offer would:
- bring together complementary logistics-oriented investment portfolios with a shared focus on resilient and growing income;
- 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;
- provide additional scope for asset management and capital recycling to enable the Combined Group's specialist management team to capitalise further on new and existing investment and development opportunities, including from within BBOX's extensive development portfolio which includes the UK's largest logistics-focused land platform capable of delivering new, best in class logistics assets at a 6-8 per cent. yield on cost target;
- establish a c.£6.3 billion portfolio focused on high-quality UK logistics assets generating over £290 million of rental income per annum with significant embedded and growing rental reversion potential;
- target sustainable earnings and dividend progression with expected cost savings from aggregate management fees arising from the unification of management under BBOX's manager, Tritax Management LLP ("Tritax"), and additional cost savings from administrative and other operational expenses;
- preserve a strong and conservatively leveraged balance sheet with a pro-forma loan to value ratio of 29 per cent., significant available liquidity and no near-term debt maturities; and
- form the fourth largest UK REIT based on market capitalisation, with a combined market capitalisation of c.£3.9 billion, offering improved liquidity for all shareholders and expected associated cost of capital benefits.
Dividends
Both BBOX and UKCM would continue to declare and pay respective quarterly dividends in the ordinary course prior to completion, without adjustment to the Exchange Ratio.
In line with its existing progressive dividend policy, BBOX currently expects a level of dividend for the full year ending 31 December 2024 such that UKCM shareholders would receive the equivalent, in BBOX dividends, of not less than the level of the current annualised UKCM dividend in respect of financial year ended 31 December 2023, provided that there are sufficient adjusted earnings (being the metric consistently used by BBOX) generated during this period by the Combined Group for dividends to be covered at this level.
BBOX reserves the right to adjust the terms of the Possible Offer to take account of the value of any dividend, return of value or other distribution which is announced, declared, made or paid by UKCM after the date of this announcement, other than (i) the UKCM quarterly dividend of 0.85 pence per share declared on 7 February 2024 in respect of the period to 31 December 2023; or (ii) any other UKCM ordinary course quarterly dividends, as referred to above, as agreed with BBOX, further details of which will be set out in any firm offer announcement.
UKCM Board Intention to Recommend
The announcement of the Possible Offer follows a series of proposals from BBOX to UKCM and a period of negotiation. Following careful consideration of the Possible Offer, the Board of UKCM, having received advice from Rothschild & Co as to the financial terms of the Possible Offer, has confirmed to BBOX that, should a firm offer be made on the financial terms of the Possible Offer, the Board of UKCM, excluding Peter Pereira Gray, is minded to recommend it to UKCM shareholders, subject to the agreement of other terms and conditions customary for an offer of this nature and completion of satisfactory due diligence.
Shareholder Support
BBOX has received non-binding letters of intent from each of Phoenix Life Limited ("Phoenix") and Investec Wealth & Investment UK ("Investec"), in respect of, in aggregate, 56.5 per cent. of UKCM's issued share capital as at 9 February 2024 (being the last business day prior to the date of this announcement), stating their intentions, if a firm offer is made by BBOX on terms no less favourable than the Exchange Ratio, to vote in favour of such offer if it is implemented by way of a scheme of arrangement in accordance with the Companies (Guernsey) Law, 2008 or, if implemented by way of a contractual takeover offer, to accept such offer.
The Phoenix letter of intent is in respect of Phoenix's entire current holding of 563,797,465 ordinary shares in the capital of UKCM representing approximately 43.4 per cent. of UKCM's total issued ordinary share capital.
The Investec letter of intent is in respect of 170,000,000 ordinary shares in the capital of UKCM currently held by Investec representing approximately 13.1 per cent. of UKCM's total issued ordinary share capital.
The Phoenix letter of intent also provides that Phoenix intends, provided that a firm offer is made by BBOX on terms no less favourable than the Exchange Ratio, to enter into an irrevocable undertaking in relation to such matters on such terms as agreed between BBOX and Phoenix.
Offer Structure
The Possible Offer would be structured as an all-share offer by BBOX for UKCM under the Code and would be implemented by way of a scheme of arrangement in accordance with the Companies (Guernsey) Law, 2008 (the "Scheme"). The Possible Offer would constitute a Class 1 acquisition under the Listing Rules and, accordingly, would be subject to the approval of BBOX's shareholders by way of an ordinary resolution at a general meeting of BBOX.
The making of any firm offer by BBOX is subject to the satisfaction or waiver of a number of customary pre-conditions, including, inter alia, completion of due diligence.
There can be no certainty that any firm offer will be made, even if the pre-conditions are satisfied or waived.
A further announcement will be made in due course.”
