(Bloomberg) -- Tritax Big Box REIT Plc has offered to buy out UK Commercial Property REIT Ltd. in an all-share deal valued at £924 million ($1.2 billion), according to a filing.
The offer represents a premium of about 10.8% to UKCM’s Feb. 9 closing price and 23% over its six-month volume weighted average as of the same date, the company said in the statement on Monday.
The acquisition, if completed, would create the UK’s fourth-largest public property company with a combined portfolio valued at more than £6 billion. UKCM shareholders would own roughly 23.3% of the combined group, according to the filing.
The purchase would also be the latest in a slew of REIT deals as boards and investors seek scale to help turn around their fortunes after being hit by a series of shocks including high interest rates, the Covid pandemic and Brexit. UK property stocks have mostly traded at wide discounts to the reported value of their assets for several years.
The creation of larger platforms is designed to cut costs, encourage a greater diversity of investors with inclusion in key indexes and maintain access to lending relationships as banks reduce their real estate exposure, focusing on their largest clients.
UKCM was previously in merger talks with Picton Property Income Ltd. but the deal collapsed late last year. Among the latest in a raft of recent deals in this sector is LondonMetric Property Plc’s acquisition of LXI REIT Plc.
Shares of UKCM jumped as much as 6.1% in early London trading, while Tritax was down 1.6%.
All-share deals between peers have become popular among REITs. That’s because they allow tie-ups to happen on the basis of both companies’ reported valuations, rather than forcing boards to accept discounted cash offers or private equity firms to pay a premium.
Tritax has traditionally focused on large UK warehouses that serve as major logistics hubs. UKCM, which is externally managed by Abrdn Plc, also invests in warehouses but has a more diverse portfolio that includes offices, hotels, student housing and stores. That means a deal will either result in significant diversification for Tritax or a slew of non-core disposals following completion.
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