UPDATE: OUE Commercial REIT and OUE Hospitality Trust propose S$1.52 billion merger

The OUE Downtown building in Signapore’s central business district. Credit: Shenton WireThe OUE Downtown building in Signapore’s central business district. Credit: Shenton Wire

This article was originally published on Monday, 8 April 2019 at 8:00 A.M. SGT; it has since been updated.

OUE Commercial REIT and OUE Hospitality Trust said on Monday that they were proposing a merger which would create one of the largest diversified REITs listed in Singapore, with assets of around S$6.8 billion.

The deal is expected to cost around S$1.52 billion, include fees, OUE Commercial REIT said.

“The enlarged REIT is expected to benefit from a significant increase in market capitalization to approximately S$2.9 billion as well as a larger free float of approximately S$1.1 billion,” the two REITs said in a joint statement filed to SGX before the market open on Monday.

“This is expected to lead to higher trading liquidity, potential index inclusion, and a wider investor base. Following the proposed merger, the
enlarged REIT could also potentially enjoy a positive re-rating,” the filing said.

The investment mandate for the combined REITs would be broadened to include commercial, hospitality and integrated developments, the REITs said.

Cash and unit deal

Under the deal, OUE C-REIT would acquire all of OUE H-Trust’s securities in exchange for a combination of cash and new units in OUE C-REIT, the two REITs said.

OUE H-Trust unitholders would receive S$0.04075 in cash per unit and 1.3583 new OUE C-REIT units per unit, it said.

After the proposed merger, OUE Group would hold 48.3 percent of the combined REITs, the filing said.

Under the expected timeline, OUE H-Trust is expected to be delisted in August.

The combined portfolios would have seven properties in three asset classes, office, hospitality and retail, the filing said, adding this would reduce concentration risk.

“This transformative merger creates a diversified, sizable and liquid REIT, which will significantly enhance our visibility within the S-REITs universe and increase our relevance to a wider investor base,” Tan Shu Lin, CEO of OUE C-REIT’s manager, said in the statement.

Chen Yi-Chung Isaac, acting CEO of OUE H-Trust’s managers, said the deal would create a “platform of scale” and enhanced financial flexibility.

OUE, OUE C-REIT and OUE H-Trust have all requested trading halts.

Citigroup Global Markets Singapore, Credit Suisse (Singapore) and OCBC are the financial advisers to OUE C-REIT, while Bank of Americal Merrill Lynch is the sole adviser to OUE H-Trust, the filing said.

 

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