Following weeks of speculation, AEW UK REIT has declined to make a bid for the share capital of Alternative Income REIT, the firm announced this morning.
On 16 July, AEW announced it was considering a possible all-share offer for AIRE’s share capital, the firm’s second attempt to agree with the team.
However, AIRE’s major shareholder, Glenstone, has made its own offer for the firm and announced it would not support AEWU’s offer. As the major shareholder, Glenstone’s support is “fundamental” to the orderly implementation of any scheme or offer combining the two companies, according to the release.
AEW has criticised Glenstone’s own offer for AIRE as being at a “substantial discount” to net asset value, compared to AEW’s offer, which was expected to be cash accretive, according to the team.
Matthew Read, senior analyst at QuotedData said: “This is a disappointing outcome for AIRE shareholders.
“There was a clear strategic logic to combining AEWU and AIRE – the portfolios are complementary, there were potential cost and scale benefits and the deal was expected to enhance AEWU’s earnings.”
With Glenstone firmly opposed, continuing the process would just risk wasting time and shareholders’ money, he conceded.
However, AEW stepping down does not mean smooth sailing for Glenstone. In fact, AIRE has cautioned its shareholders against accepting Glenstone’s offer.
See also: AEW UK REIT considering second attempt at merger with AIRE
The terms of the Glenstone offer materially undervalue AIRE, seek to gain control of the trust without paying a proper premium, have failed to address the potential conflict of interest and do not offer shareholders a clean exit, among other problems, according to AIRE.
“Glenstone’s announcement does not explain why AIRE Shareholders should transfer control of the company and its assets to Glenstone at such a material discount,” the board noted.
At the time of writing, Glenstone’s offer provides a cash consideration of roughly 70p per share, a 16% discount to AIRE’s net asset value of 83.3p per share.
QuotedData’s Read said: “Returning to Glenstone’s offer, we still think this comes at too wide a discount and that AIRE shareholders would be better served by the REIT forging ahead on its own.”
“Glenstone is now seeking to explain away the actual acceptance figures by speculating about acceptances which may have been submitted through retail platforms,” the board of AEW added.
The board also argued that Glenstone is seeking to portray the fact AIRE has not published a new dividend target as evidence of an uncertain future. However, the AIRE team argued it has typically announced its dividend in November, at the same time as the first interim dividend.
“The board sees no reason to depart from this established approach and Glenstone’s suggestion that the absence of a new dividend target at this stage creates uncertainty is therefore misplaced.
“The AIRE board’s view continues to be that the Glenstone offer is opportunistic and fundamentally undervalues the company.”
