The board of the AEW UK REIT (AEWU) has confirmed it is considering an all-share offer for the entire listed capital of Alternative Income REIT (AIRE), according to a London Stock Exchange announcement this morning.
Under the terms of the possible offer, shareholders will receive 0.725 shares in AEW UK REIT for each AIRE share, the announcement explained.
Part of the rationale behind the possible offer is the desire to achieve an appropriate scale for AEWU and ensure the strategy “remains relevant at a time of much corporate activity and competition”. At the time of writing, AEWU has a NAV of roughly £172m according to its first quarter update.
AEWU has until 5pm on 13 August to decide if it will make a firm offer.
This is not the first time AEWU has considered an offer for its peer. Earlier this year, following press speculation, AEWU made an “indicative and non-binding” offer for AIRE, but opted not to make a firm offer by the initial deadline.
See also: AEW UK REIT considers acquiring alternative income property trust
“It was of regret to the board of AEWU that this opportunity was not able to progress at that time,” the announcement noted. “AIRE’s portfolio is consistent with the assets and management style applied within AEWU.
“In particular, AIRE’s assets’ inflation-linked income stream was felt to be very complementary to the strong rental growth prospects offered by the portfolio of AEWU and the possible combination of the companies could have served both sets of shareholders’ interests.”
Emma Bird, head of investment trust research at Winterflood, noted: “While this new offer reflects a discount of 6% to AIRE’s NAV, versus the 3% discount incorporated in AEWU’s initial proposal, we believe it still represents an attractive outcome for AIRE shareholders, particularly compared to Glenstone REIT’s cash offer at a 15% discount.”
Earlier this year, Glenstone REIT, which owns almost 25% of AIRE’s shares, announced the intent to issue a cash offer, which the board of AEWU argued compared “unfavourably” to their own offer.
Winterflood’s Bird added: “As we noted previously, AIRE shareholders would benefit from a merger with AEWU by becoming shareholders in a larger, more liquid vehicle, with a strong long-term performance record and a history of trading at one of the tightest discounts in the property investment trust sector.”
Both strategies have performed well for their investors in recent years, with AEWU up 39% over the past three years, and AIRE up 37.9%, the top two performances in the IT Property – UK commercial sector, according to data from FE fundinfo.
