ESR-Reit and Viva Industrial Trust (VIT) halted trading on Friday (May 18) before the stock market opened, amid expectations of a merger announcement.
In a research note on Thursday, broker OCBC Investment Research downgraded its rating on VIT from "buy" to "hold", reducing its fair value estimate on the counter from $0.93 to $0.90.
Units in VIT last traded at $0.89 per unit on Thursday, while units in ESR-Reit closed down 1.87 per cent to $0.525 apiece.
If successful, the merger will be the first in the history of Singapore Reits, and analysts say VIT is unlikely to be ESR-Reit's last target.
According to ESR-Reit's announcement in January, the Reit is looking to acquire all of VIT's stapled securities, and in return issue new ESR-Reit units to the stapled security holders. It did not disclose pricing details.
The period of exclusivity for discussions on the proposed merger had been extended from May 15 to May 31.
Should the merger be completed, the enlarged ESR-Reit is expected to become the fourth largest industrial S-Reit in terms of overall asset size, with a $3 billion combined portfolio.
Co-founded by Warburg Pincus and backed by blue-chip institutional investors including the Canada Pension Plan Investment Board, Goldman Sachs, and Morgan Stanley Alternative Investment Partners, the ESR group has assets under management of over US$10 billion.