Activist investor Quarz Capital Management is opposed to the terms of a proposed $4.2 billion merger of two Temasek-linked Singapore real estate investment trusts (Reits), saying the target company has been significantly undervalued.
It is urging Mapletree North Asia Commercial Trust (MNACT) to negotiate an improved offer from Mapletree Commercial Trust (MCT), according to an open letter dated Feb 9, and seen by Reuters.
Quarz, which has previously been successful in helping to block a Singapore Reit deal, says it and its affiliates hold stakes that rank them among the top 10 unit holders of MNACT.
In December 2020, Quarz and Black Crane Capital voted down a merger between ESR-Reit and Sabana Shari'ah Compliant Industrial Reit.
Yesterday, an external spokesman for MNACT and MCT said they had no immediate comment on Reuters' queries.
Temasek declined to comment. Its Mapletree Investments, a global real estate conglomerate, is the single largest unit holder in both Reits, owning 32.6 per cent of MCT and 38.1 per cent of MNACT as at Dec 29 last year.
On Dec 31, MCT announced plans to buy MNACT, seeking to create the seventh-largest Reit in Asia with an expected market valuation of about $10.5 billion.
MNACT's main portfolio includes one commercial property in Hong Kong and two in China, while MCT is a Singapore-focused Reit.
Quarz, which is run by Mr Jan Moermann, a former Swiss banker, said it supports the deal rationale but objects to the merger ratio and price.
"Quarz has been approached by many MNACT unit holders on MCT's inferior offer for MNACT. We agree that the offer is value destructive to unit holders and significantly undervalues MNACT," Mr Moermann and Mr Havard Chi, Quarz's Singapore-based research head, said in the letter.
MCT offered to acquire all units of MNACT in exchange for MCT units, or a combination of both cash and MCT units that gave the target's unit holders $1.1949 per unit.
This represented a 7.6 per cent premium to MNACT's Dec 27 closing price of $1.11 and was based on MCT's unit price of $2.
The companies said the offer was in line with MNACT's net asset value (NAV) per unit.
Since then, MCT's units have fallen 8.5 per cent to $1.83 as at Wednesday, while MNACT's were unchanged at $1.1.
Quarz argued in the letter that the offer price represented one of the "highest discounts to net asset value in the 20-year history of the Singapore Reit market with multiple takeovers and mergers".
"MNACT's board and management should initiate a transparent and robust process to sell the assets above NAV of $1.23 instead of recommending the sub-optimal offer of $1.08 to $1.10 from MCT," Quarz said.
It added that it was confident MNACT would stage a strong recovery from the second half of this year, citing global Covid-19 vaccination rates.
Singapore's Reit market is dominated by retail investors who are attracted to the high dividends paid by such trusts as the firms are mandated to pay out 90 per cent of their rental income.
Founded in 2011, Quarz has publicly campaigned against about a dozen Singapore-listed firms.
REUTERS
