The boards of Custodian Property Income Reit and Abrdn Property Income Trust (API) have announced an agreement over an all-share merger which will see the trusts combine to form a £1bn Reit.
The deal, if approved by shareholders, will see the £609m Custodian Property Income acquire the entire issued share capital of API.
The acquisition places each Abrdn Property Income share at 62.1p, or a total £237m, and represents a premium of about 29.4% to the trust’s closing price on 18 January.
As part of the deal, current Custodian shareholders will make up 59.7% of the enlarged trust, with shareholders in the Abrdn trust accounting for 40.3%.
According to the Association of Investment Companies, API currently trades at a 42.9% discount to net asset value.
The two boards said they believe the trusts have complementary portfolios, offering enhanced diversification for shareholders.
Commenting on the merger, Custodian Reit chair David MacLellan, chairman of Custodian said: “In the current interest rate environment, security and resilience of cash flows, scale and liquidity, supported by a clear and compelling strategic direction are the defining characteristics of a successful Reit.”
James Clifton-Brown, chair of API, added: “API has always sought to focus on delivering attractive, income-driven returns for shareholders. Over the years, API’s manager, Abrdn Fund Managers, has assembled an attractive portfolio on the company’s behalf, with a weighting to more favoured areas of the market, a diversified tenant base and a focus on ESG.
“The board of API would like to thank the management team for the important role they have played in assembling and managing the portfolio.
“The merger will enable API Shareholders to retain exposure to the portfolio and its growth prospects at a significant premium to API’s share price, with the prospect of superior share liquidity and an enhanced and fully covered dividend,” he added.
“The API Board believes that, with increased scale and an enhanced capital structure, the combined group will be well positioned for the future.”