Embattled Alternative Income REIT (LON:AIRE) has ‘strongly advised’ shareholders take no action in relation to a hostile bid from Glenstone. AIRE argues the 70p cash offer at a 17% discount to net asset value (NAV) could be detrimental to minority shareholders. They could be left stranded in a company dominated by Glenstone, which is AIRE’s biggest shareholder.
Frustratingly, AIRE remained tight-lipped about why AEW UK REIT (LON:AEWU) walked away from an earlier bid. Simon Bennett and Stephanie Eastment are AIRE’s two independent directors. They insisted there are no material issues that haven’t been disclosed with regard to AEWU’s lapsed offer.
Discounted offer spurned
AIRE’s independent board highlighted many reasons why it is rejecting Glenstone’s £56.3 million offer.
The principal one is the bid represents a 17% discount to the trust’s latest published NAV of 84.4p per share. The offer also represents a ‘negligible’ premium to AIRE’s undisturbed share price of 69.7p on 14 May.
In addition, the offer price is based on the assumption that no dividends or other returns of capital will be paid prior to completion. But a fourth quarterly dividend is due to be paid in respect of FY26.
The payment of this dividend would mean the effective value of Glenstone’s offer would reduce from 70p to 68.6p, a 19% discount to the fund’s latest NAV.
What does Glenstone want?
Glenstone is a long-standing shareholder in AIRE. It wants to appoint its own executives to the board and pursue a managed wind-down of the portfolio. Glenstone also plans to de-list AIRE from the London Stock Exchange.
AIRE’s independent board is concerned these measures would remove the liquidity and ability for minority shareholders to trade in the company’s shares.
The measures would also mean there could be ‘limited independent oversight in relation to key decisions including asset disposals, capital allocation and dividend policy’.
Moreover, minority shareholders would have ‘significantly reduced protections compared to those currently in place’.
The Winterflood view
Winterflood’s Emma Bird commented: ‘As we thought at the time of Glenstone’s offer announcement, the board of AIRE has rejected this offer on the grounds that it materially undervalues the fund at a 19% discount to NAV (after deducting the dividend to be paid).
‘The independent board’s other concerns regarding the uncertainty of the transaction completing, and the risks to minority shareholders who may remain invested in an unlisted vehicle, are also valid.’
Read the press release here: https://www.londonstockexchange.com/news-article/AIRE/further-response-to-firm-offer-by-glenstone/17640725
