Londonmetric Property reaches agreement on terms for merger with LXi REIT

Merger set to create the UK’s fourth-largest REIT

Are Reits trading at discount a value trap?

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FTSE 250-listed REIT, Londonmetric Property, will acquire LXi REIT in a merger that will create a £6.2bn portfolio for structurally supported sectors.

The companies pursued talks of the merger in December 2023, making the announcement of the acquisition days before its 15 January deadline. For each LXi share held, investors will receive 0.55 of New Londonmetric shares. Current Londonmetric shareholders will maintain 54% of the new share capital while LXi shareholders will have 46%.

Given LondonMetric’s closing price of 197.4p on 15 December last year, the all-share merger would value any issued – and to-be-issued – ordinary share capital at £1.9bn. As such, the merger would represent a 9% premium to LXI’s volume-weighted average closing price of 99.5p over one month to 15 December.

Among several listed benefits, LondonMetric and LXI’s boards say the merger will result in the creation of the UK’s fourth-largest REIT; “substantial” cost and operating synergies; stronger income longevity and security; a more resilient capital structure and more robust credit characteristics.

Andrew Jones, chief executive of LondonMetric, said: “The deal gives us access to a very well let triple net portfolio of key operating assets and brings together two highly complementary investment approaches that embrace the qualities of income compounding.

“This strategy will not change and our proactive culture will remain intact, and while we will undoubtedly look to reposition parts of the portfolio, this will be more of a tilt than a pivot with logistics remaining our strongest conviction call for organic growth.”

Through the deal, LondonMetric will hold a UK REIT with EPRA net tangible assets around £4.1bn.

Cyrus Ardalan, chair of LXi, said: “The merger with LondonMetric will build on the strengths and track records of both LXi and LondonMetric. It will create the UK’s leading triple net lease REIT with an enlarged and more diversified portfolio aligned to structurally supported sectors, a robust and predominantly unsecured capital structure, broader appeal to investors and enhanced share liquidity, and a highly regarded internal management team.

“The merger will position the combined group for continued growth and outperformance and the delivery of reliable, sustainable and progressive dividends through the cycle, thereby underpinning superior total shareholder returns.”

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