A bidding war for commercial property-focused fund Alternative Income REIT (LON:AIRE) has broken out with AEW UK REIT (LON:AEWU) re-entering the fray.
AEWU, whose management group AEW previously ran AIRE, is mulling a possible all-share offer at a 6% discount to AIRE’s NAV.
This is a more attractive offer than the cash bid on the table from Glenstone REIT. Glenstone is AIRE’s largest shareholder with a 25% stake.
An AEWU takeover would allow AIRE’s investors to retain a position in a listed REIT that has paid an 8p per share annual dividend since 2016.
Earnings accretive deal
AEWU is considering offering 0.725 of its shares for each AIRE share, priced at a 6% discount to the latter’s net asset value (NAV), but 15% above the 15 July closing price.
AEWU said the possible offer could lead to the combination of two REITs with ‘aligned portfolios, offering greater portfolio diversification, the benefits of increased scale, a reduction in operating costs and an attractive ongoing dividend per share, with AEWU currently paying an annual dividend of 8 pence’.
A takeover of AIRE should also be earnings accretive for AEWU. AEWU had already been ‘monitoring’ the situation, having previously worked on an all-share offer at 3% below the then NAV.
On 6 July, Glenstone sweetened its bid for AIRE from 70p to 71.4p per share in cash. While it dubbed this new offer ‘final’, Glenstone reserved the right to upsize its offer should a counterbid emerge.
AIRE investors will be pleased to see that AEWU is mulling a counter offer for AIRE. Shareholders would benefit from a merger with AEWU by becoming shareholders in a larger and more liquid vehicle.
AEWU has a strong long-term performance record and a history of trading at one of the tightest discounts in the property investment trust sector.
As Winterflood’s Emma Bird explained: ‘While this new offer reflects a discount of 6% to AIRE’s NAV, versus the 3% discount incorporated in AEWU’s initial proposal, we believe it still represents an attractive outcome for AIRE shareholders, particularly compared to Glenstone’s cash offer at a 15% discount.’
Bird also pointed out: ‘AEWU shareholders would also benefit from increased scale and the purchase of a high yielding portfolio at a small discount to book value.’
Read the press release here: https://www.londonstockexchange.com/news-article/AEWU/possible-offer-for-alternative-income-reit-plc/17691397
