Sabana Real Estate Investment Trust (Reit), which was under pressure from activist funds over a planned merger with larger rival ESR-Reit, said its unit holders had voted against a proposal to amend its trust deed, thus, terminating the merger.
The activists had said the deal between Sabana Reit and ESR-Reit, whose managers are both owned by a unit of Asian logistics giant ESR Cayman, had undervalued Sabana Reit.
Sabana Reit said in a statement yesterday that 66.7 per cent of its unit holders had backed the proposal to amend its trust deed, but this was below the 75 per cent required for the merger vote to go ahead. ESR-Reit managers and others holding 24.6 per cent of Sabana Reit were not allowed to vote.
"While we believe the merger has a compelling strategic rationale, unit holders have expressed that they prefer Sabana Reit to remain as a standalone Reit," said chief executive officer Donald Han.
Earlier in the morning yesterday, ESR-Reit unit holders had voted overwhelmingly in favour of the merger.
The activists' victory marks a rare win in Singapore and signal their growing clout with retail shareholders.
Sabana, one of Singapore's smallest Reits, has said voting down the deal with a rival four times its size would harm its growth prospects amid a lack of alternative bidders.
"When we agreed to the merger process, it was due to a bigger ship sailing past and we wanted to hop onto it so we could continue the journey whatever the weather," Mr Han, who became Sabana Reit's CEO in 2018, told Reuters.
Singapore is home to Reits collectively worth over US$70 billion (S$93.2 billion), making it Asia's largest Reit market.
Activist Quarz Capital had proposed Sabana Reit and ESR-Reit merge last year in a cash-plus-stock deal that would value Sabana Reit at 54.5 cents a unit, while Black Crane Capital had voiced concerns about Sabana Reit's market valuations.
When both Reits announced an all-stock deal in July - just as the pandemic pummelled the sector - valuing Sabana Reit at $397 million or 37.7 cents a unit, both activists rejected it.
They said last month that Sabana Reit had failed to close the net asset value discount and had recommended "a value destructive merger with a Reit controlled by its owner".
The funds set up a website called "Save Sabana Reit" stacked with presentations against the merger, sent letters to management and held webinars to win over retail investors.
They also sought regulatory intervention to disallow ESR Cayman from managing both Reits if the merger fails, although the central bank has said there are no rules restricting such arrangements.
"The activists have pinned themselves into a corner. Is Sabana worth more? Yes, but is there anyone else who can unlock its value in this weak market? No," said Mr Justin Tang, research head at United First Partners.
This is the second merger attempt by both Reits after talks were terminated in 2017.
REUTERS
