SGX Market Updates

S-REIT M&As: CapitaLand Commercial Trust - CapitaLand Mall Trust & ESR-REIT - Sabana REIT Mergers


16 September 2020

  • In January, CapitaLand proposed a merger of CapitaLand Commercial Trust (CCT) and CapitaLand Mall Trust (CMT) in an S$8.3 billion cash-and-stock deal. Both REITs will hold their respective unitholder meetings on 29 Sep to seek approval for the proposed deal with the long stop date on 30 Nov.

  • Should unitholders support the CCT-CMT merger, there will be a new constituent added to the STI. The current STI Reserve List (sort by highest market cap) is made up of Keppel DC REIT (S$4.9B), Fraser Logisitics & Commercial Trust (S$4.6B), Suntec REIT (S$4.1B),  NetLink NBN Trust (S$3.9B) and Keppel REIT (S$3.7B).

  • In July, ESR-REIT and Sabana REIT announced a proposed merger, by way of a trust scheme of arrangement, which will see ESR-REIT acquiring all units of Sabana REIT from the unitholders of Sabana REIT, in exchange for new units in ESR-REIT. In Oct 2018, ESR-REIT completed a merger with Viva Industrial Trust also via a trust scheme of arrangement.

CapitaLand Commercial Trust (CCT) & CapitaLand Mall Trust (CMT) Merger

  • On 22 January 2020, CapitaLand announced the proposed merger of CapitaLand Commercial Trust (CCT) and CapitaLand Mall Trust (CMT) in an S$8.27 billion cash-and-stock deal.
  • The new combined entity – called CapitaLand Integrated Commercial Trust (CICT) – is expected to become the third largest REIT in the Asia Pacific and the biggest in Singapore, with market cap of about $16.8 billion and combined property value of about $22.9 billion (based on valuations of CMT's and CCT's properties as at Dec 31, 2019).
  • With 15 shopping centres, CMT is the largest mall owner in Singapore, while CCT is the biggest office landlord with 10 buildings, eight in Singapore and two in Frankfurt, Germany.
  • The deal, by way of a trust scheme of arrangement, is subject to the approval of unitholders of CMT and CCT, and will see CMT acquiring all the issued units in CCT in the form of cash and new CMT units.
  • For each CCT unit they hold, CCT unitholders will receive $0.259 in cash and 0.72 new CMT units at an issue price of S$2.59 apiece.
  • This means CCT unitholders will be paid a scheme consideration of $2.1238 per CMT unit, which implies a gross exchange ratio of 0.82 times.
  • The long-stop date for the proposed merger between CMT and CCT has been extended from Sept 30 to Nov 30.
  • Both REITs will hold their respective unitholder meetings on Sept 29 to seek approval for the proposed deal.
  • The two trust managers have added deal sweeteners for their proposed merger, such as higher accretion to their respective distribution per unit (DPU).
  • CMT is also waiving the acquisition fee of $111.2 million in recognition of the unprecedented circumstances brought about by COVID-19 – an increase from the 50% it said it would waive in January.

ESR-REIT & Sabana REIT Merger

  • On 16 July 2020, ESR-REIT and Sabana Shari'ah Compliant Industrial REIT announced a proposed merger, by way of a trust scheme of arrangement, which will see ESR-REIT acquiring all units of Sabana REIT from the unitholders of Sabana REIT, in exchange for new units in ESR-REIT.
  • The Enlarged REIT will become the fourth-largest industrial S-REIT by market share based on gross floor area (GFA).
  • The scheme consideration is based on a fixed gross exchange ratio of 0.94 new ESR-REIT consideration units in exchange for each Sabana REIT unit, and not a fixed issue price.
  • By way of illustration, if the scheme becomes effective, each Sabana REIT unitholder will receive 94 new ESR-REIT consideration units for every 100 Sabana REIT units held.
  • Following the merger, the sponsor, ESR Cayman, is expected to hold about 12.2% of the total issued units in the Enlarged REIT.
  • The Enlarged REIT will have a market capitalisation of approximately S$1.8 billion, and a free float of approximately S$1.3 billion, approximately 4.5x of Sabana REIT’s free float.
  • The Enlarged REIT will have an expanded network of 75 assets with a total GFA of about 19.2 million square feet across Singapore.
  • Last month, the Monetary Authority of Singapore (MAS) clarified that a shareholder group can own substantial stakes in two REIT managers that manage trusts invested in the same property class. More details on what MAS said are found here.

Completed S-REIT Mergers

  • In January 2019, CapitaLand kicked off the consolidation wave in Singapore’s REIT industry by striking a S$6 billion deal with Temasek Holdings to combine Ascendas and Singbridge.
  • This was followed by OUE Commercial REIT, which agreed to buy OUE Hospitality Trust in April 2019.
  • In July 2019, Ascott Residence Trust and Ascendas Hospitality Trust agreed to create the largest hospitality trust in the Asia-Pacific region, with S$7.6 billion of assets comprising serviced residences and hotels.
  • Last December, Frasers Logistics & Industrial Trust agreed to buy Frasers Commercial Trust in a S$1.5 billion deal.

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