LXi REIT
Company Notes
Proposed merger with Secure Income REIT
Yesterday, the Boards of LXi REIT and Secure Income REIT announced that they had reached agreement on the terms and conditions of a recommended offer, under which LXi REIT will acquire the entire issued share capital of Secure Income REIT via a scheme of arrangement. The share price of LXi REIT fell by 3.7% yesterday following the announcement, to 137.0p, while Secure Income REIT’s share price rose 8.8% to 447.0p.
Highlights of the proposed merger include:
• Shareholders will be entitled to receive 3.32 new LXi REIT shares for each Secure Income REIT share held. A partial cash alternative will be available, under which Secure Income REIT shareholders can elect to receive cash of 118.88p per share, capped at 25% of the total offer (maximum aggregate cash consideration of £385m). This will be funded by a new debt facility.
• Following completion of the merger, existing LXi REIT shareholders will hold around 53% and Secure Income REIT shareholders will hold approximately 47% of the enlarged fund.
• The investment adviser to LXi REIT has agreed to acquire Prestbury Investment Partners, the investment adviser to Secure Income REIT, for a cash consideration of £40m. The cost of this will not be borne by shareholders of either fund.
• Certain key members of the Prestbury management team will continue to have an ongoing role in the combined fund. Following completion of the merger, the Prestbury management team will hold 5.8% of LXi REIT’s issued share capital, valued at £142m.
• The merger is forecast to unlock annual cost savings of £8.6m, comprising investment advisory fee savings of £7.5m p.a. and operational cost savings of £1.1m p.a.
• Following completion of the merger, the combined £3.9bn portfolio will contain 346 properties that are 100% occupied, with a WAULT of 26.4 years. 98% of rental income will benefit from inflation-linked rent reviews or fixed uplifts.
• LXi REIT has received irrevocable undertakings and letters of intent in respect of 142.8m Secure Income REIT shares, representing 44.1% of the issued ordinary share capital.
• Shareholder meetings seeking approval of the merger are due to be held in late June. The merger is expected to complete in early July.
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