SINGAPORE (THE BUSINESS TIMES) - The managers of Mapletree Commercial Trust (MCT) and Mapletree North Asia Commercial Trust (MNACT) have proposed a merger that will propel the combined entity to become one of Asia's 10 largest real estate investment trusts (Reits).
The merged entity, to be named Mapletree Pan Asia Commercial Trust (MPACT), will have a theoretical market capitalisation of approximately $10.5 billion.
The combined portfolio will comprise 18 commercial assets across Singapore, China, Hong Kong, Japan and South Korea, with assets under management of approximately $17.1 billion.
It will bring together under one roof properties like MCT’s VivoCity and Mapletree Business City I & II with MNACT’s Festival Walk in Hong Kong and Gateway Plaza in Beijing.
To be done via a trust scheme, the merger will see MNACT unit holders receive a scheme consideration of $1.1949 for each MNACT unit held as at the record date to be announced.
For each MNACT unit held, unitholders will receive either 0.5963 new MCT units at an issue price of $2.0039 apiece, or a combination of 0.5009 consideration units and $0.1912 in cash.
For illustrative purposes, this means that a unit holder holding 10,000 MNACT units will receive 5,963 MCT units should they elect to receive the scrip-only consideration or 5,009 MCT units and $1,912 in cash should they elect to receive the cash-and-scrip consideration.
This implies a gross exchange ratio of 0.5963 times.
The scheme consideration price of $1.1949 is in line with MNACT's net asset value (NAV), and represents a 7.6 per cent premium to MNACT's trading price on Dec 27 and a 17.3 per cent premium to its 12-month volume-weighted average price.
The Reit managers said this translates to a one-year total return of 32.2 per cent to MNACT unit holders.
On a pro forma basis, the merger will be 8.9 per cent accretive to distribution per unit and 6.5 per cent accretive to NAV for MCT unitholders.
The total scheme consideration amounts to some $4.2 billion. No more than $417.3 million, or 9.9 per cent of the total consideration, will be fulfilled in cash, with the remaining amount to be satisfied via consideration units.
MPACT is expected to have a gearing ratio of 39.2 per cent as at Sept 30, 2021, on a pro forma basis, and will have a debt funding capacity of approximately $3.8 billion.
"On a strategic level, we believe this is a once-in-a-lifetime opportunity to bring together two leading commercial Reits with highly complementary qualities. Nearly every Reit has been focused on growing through the acquisition of assets. However, we believe that the key to sustained growth is a platform with scale and reach," said Ms Sharon Lim, chief executive of MCT's manager.
Said Ms Cindy Chow, CEO of MNACT's manager: "With a strengthened portfolio, higher financial flexibility and debt headroom, MPACT will be well placed to accelerate its growth, pursue larger value-creating acquisitions and ride on the recovery and long-term growth of Asia."