CapitaLand will combine Ascott Residence Trust (Ascott Reit) and Ascendas Hospitality Trust (A-H Trust) to form the largest hospitality trust in the Asia-Pacific and the eighth biggest globally.
The combined entity will keep the name Ascott Residence Trust (Ascott Reit) and will have a total asset value of $7.6 billion, the companies announced yesterday.
The merger creates a portfolio of 88 properties with more than 16,000 units in 39 cities and 15 countries across the Asia-Pacific, Europe and the United States.
It will also diversify Ascott Reit's global portfolio and give it a presence in Brisbane and Seoul.
"With access to a larger capital base and a higher debt headroom of about $1 billion, we will have greater financial flexibility to seek more accretive acquisitions and value enhancements," said Mr Bob Tan, chairman of Ascott Residence Trust Management.
"The combined entity can then... potentially enjoy a positive re-rating of the unit price and gain a wider investor base, which would be beneficial to all our unit holders."
Portfolio of properties that the merger will create, with more than 16,000 units in 39 cities and 15 countries across the Asia-Pacific, Europe and the United States.
The consideration for the proposed merger is about $1.2 billion, comprising $61.8 million in cash and 902.8 million new units of the new entity.
Through a trust scheme of arrangement, Ascott Reit will acquire all A-H Trust units for $1.0868 apiece, comprising 5.43 cents in cash and 0.7942 Ascott Reit-BT units issued at $1.30.
The merger follows calls from activist fund Quarz Capital Management, a long-term shareholder of A-H Trust, to merge both entities.
CapitaLand group chief executive Lee Chee Koon had told shareholders in April that one of the ways to resolve the conflict in the two trusts' overlapping mandates was through a merger.
A-H Trust consists of Ascendas Hospitality Real Estate Investment Trust (A-H Trust Reit) and Ascendas Hospitality Business Trust (A-H Trust BT).
It was owned by Temasek subsidiary Ascendas-Singbridge, which CapitaLand acquired in January. That deal was completed on Monday.
CapitaLand owns about 45 per cent of the units in Ascott Reit and 28 per cent of A-H Trust, which will delist following the merger.
Once the merger is completed, CapitaLand expects to have a 40.2 per cent stake in Ascott Reit-BT.
The proposed deal, which will be distribution per unit accretive for investors in Ascott Reit and A-H Trust, is subject to investor approval at meetings expected to be held later this year, the companies said.
CapitaLand shares closed up 1.38 per cent at $3.68, Ascott Reit closed down 2.3 per cent to $1.28, and A-H Trust closed up 6.7 per cent at $1.04.
Both trusts called for trading halts yesterday morning and requested they be lifted half an hour before the noon trading break.
Correction note: The article has been edited to reflect the correct name of the combined entity. We are sorry for the error.