ESR-Reit, VIT to merge, creating $3b asset trust

The merger involves ESR-Reit acquiring all of Viva Industrial Trust's stapled securities and, in return, issuing new ESR-Reit units to the stapled security holders. The deal is expected to be completed by the third quarter of this year.
The merger involves ESR-Reit acquiring all of Viva Industrial Trust's stapled securities and, in return, issuing new ESR-Reit units to the stapled security holders. The deal is expected to be completed by the third quarter of this year.PHOTO: VIVA INDUSTRIAL TRUST

Deal will produce S'pore's fourth-largest industrial Reit, with market cap of $1.7b

ESR-Reit is merging with Viva Industrial Trust (VIT) in a proposed deal that will create Singapore's fourth-largest industrial Reit with a combined $3 billion in assets.

The merger announced yesterday, which will be the first involving real estate investment trusts (Reits) here, will be by way of a trust scheme of arrangement.

It involves ESR-Reit acquiring all of VIT's stapled securities and, in return, issuing new ESR-Reit units to the stapled security holders. This will provide VIT with an implied equity value of about $936.7 million.

Based on the issue price of 54 cents for a new ESR-Reit unit, VIT investors can expect $9.60 in cash, and 160 new ESR-Reit units for every 100 stapled securities held.

ESR Funds Management will manage the enlarged trust, which will have a market cap of $1.7 billion, said the managers.

Some executives and board members of Viva Industrial Trust Management will join the ESR-Reit manager, subject to regulatory approval.

The total acquisition cost of about $1.5 billion to be paid by ESR-Reit includes a scheme consideration of $936.7 million and a refinancing of VIT's existing debt of $525 million, among other expenses.

The managers said the transaction is deemed to be accretive for VIT and ESR-Reit investors on a historical pro forma basis.

The ESR-Reit manager added that the merger's other benefits include the creation of a sizeable and liquid trust and growth being supported by a committed developer-sponsor, ESR, which is a pan-Asian logistics real estate platform.

Mr Adrian Chui, executive director and chief executive of the ESR-Reit manager, said: "Size does matter for Reits. This merger will be a milestone transaction that will create a portfolio that is stronger, more resilient and better-diversified.

"Leveraging our respective capabilities in operational and capital management, we will be in a strong position to deliver value to unit holders."

The merger is expected to be completed by the third quarter of this year.

ESR-Reit will first have to gain approval via an ordinary resolution with a majority vote, as well as an extraordinary resolution with 75 per cent or more of the votes cast in favour of issuing new ESR-Reit units.

A "whitewash waiver" is also needed to waive the requirement for the Tong Group to make a mandatory general offer for ESR-Reit as a result of an increase in its unit holdings post-merger.

At VIT's end, approval for the scheme is required from more than 50 per cent of stapled security holders voting either in person or by proxy at the scheme meeting representing not less than 75 per cent in the value of stapled securities, among other conditions.

Once the deal has been completed, VIT will be wholly owned by ESR-Reit and delisted, subject to approval from the Singapore Exchange.

VIT units closed unchanged at 89 cents on Thursday, while ESR-Reit closed down 1.87 per cent at 52.5 cents. Trading in both counters was halted yesterday before the market opened.

A version of this article appeared in the print edition of The Straits Times on May 19, 2018, with the headline 'ESR-Reit, VIT to merge, creating $3b asset trust'. Print Edition | Subscribe