UPDATE: Frasers Logistics Trust and Frasers Commercial Trust enter S$1.54 billion merger deal

The combined portfolio of Frasers Logistics & Industrial Trust and Frasers Commercial Trust. Credit: Frasers Logistics & Industrial Trust and Frasers Commercial TrustThe combined portfolio of Frasers Logistics & Industrial Trust and Frasers Commercial Trust. Credit: Frasers Logistics & Industrial Trust and Frasers Commercial Trust

This article was originally published on Monday, 2 December 2019 at 8:07 A.M. SGT; it has since been updated to add more details.

Frasers Logistics & Industrial Trust (FLT) and Frasers Commercial Trust (FCOT) announced Monday they plan to merge in a S$1.54 billion deal, creating a diversified S$5.7 billion portfolio of industrial, office, business park and commercial assets across Asia Pacific, Europe and the U.K.

Under the deal, Frasers Logistics Trust will acquire all units of Frasers Commercial Trust for S$1.68 for each FCOT unit, with unitholders receiving S$0.151 in cash and 1.233 FLT units at an issue price of S$1.24 each, the REITs said in a filing to SGX.

The total consideration is around S$1.54 billion, including around S$1.38.1 million in cash and 1.13 million units, the REITs said.

The pricing is a premium of 0.6 percent to FCOT’s last traded price on 27 November, and a 3.5 percent premium to its one-month volume weighted average price, the REITs said.

The combined REITs are expected to be among the top-10 largest Singapore REITs by market capitalization in the FTSE EPRA/NAREIT Index, giving it greater representation in the index, the filing said, adding it will have around 300 tenants across 98 properties in five countries.

In conjunction with the merger, FLT has proposed acquiring 50 percent of Farnborough Business Park from a wholly owned subsidiary of Frasers Property for around 90.1 million pounds, or around S$157.7 million; FCOT currently indirectly holds the remaining 50 percent of the business park and once the the deal is completed, it will be wholly owned by the combined REITs, the filing said.

Robert Wallace, CEO of Frasers Logistics Trust’s manager, said the deal would allow the combined REIT to provide business services to a wider customer base.

“The merger will be a win-win transaction for both FLT and FCOT unitholders, delivering DPU [distribution per unit] accretion and greater growth prospects,” Wallace said in the statement. “It enhances our financial capacity and flexibility to pursue acquisitions through our expanded mandate and a [right of first refusal] pipeline in excess of S$5.0 billion.”

The merger is expected to result in 2.2 percent DPU accretion for FLT unitholders and 4.2 percent DPU accretion for FCOT unitholders, on a pro forma basis, the filing said.

After the deal is completed, the REITs’ sponsor and related companies are expected to hold around 21.9 percent of the combined REIT, compared with currently holding around 19.6 percent of FLT and 25.9 percent of FCOT, the filing said.

The merger is conditional on approval from both REITs’ unitholders and regulatory approval, the filing said.

Merrill Lynch (Singapore) is the sole financial adviser to FLT’s manager, while DBS Bank is the sole financial adviser to FCOT’s manager, the filing said.