ESR Cayman shareholders approve US$5.2B takeover bid for ARA Asset Management

Signage for HKEx, Hong Kong’s stock exchangeSignage for HKEx, Hong Kong’s stock exchange

Shareholders of Hong Kong-listed ESR Cayman have given their approval for the bid to acquire ARA Asset Management for US$5.2 billion in a cash and share deal, according to filings to the Hong Kong Stock Exchange and Clearing (HKEx) and the Singapore Exchange (SGX) Wednesday.

At an extraordinary general meeting (EGM) held Wednesday, holders of 91.81 percent of the total shares voted approved the deal, compared with 8.19 percent against, topping the 50 percent threshold needed for the deal to proceed, the filing said.

Approval of ESR Cayman’s bid for ARA Asset Management is one of the key conditions for ESR-REIT‘s takeover of ARA LOGOS Logistics Trust.

In August, ESR Cayman offered US$5.2 billion to acquire ARA Asset Management, with around 90 percent of the consideration, or US$4.7 billion, to be paid in new ESR shares and vendor loan notes, while US$519 million would be paid in cash, partially funded by a US$250 million share placement to Sumitomo Mitsui Banking Corp. (SMBC), with US$269 million from debt and/or internal resources. In October, ESR Cayman said it would not issue vendor loan notes and would instead make up that portion of the consideration with the issuance of more shares.

The consideration shares will be issued at HK$27 each. Shares of ESR Cayman were trading at HK$25.45 at 10:54 a.m. SGT Thursday.

The enlarged ESR Group would become Asia Pacific’s largest real estate and real asset manager, and the world’s third-largest listed real estate asset manager, with a combined assets under management (AUM) of US$129 billion, ESR Cayman has previously said, with more than US$50 billion of the AUM to come from New Economy real estate.

ESR Cayman’s shareholder approval of the ARA Asset Management deal puts ESR-REIT’s bid for ARA LOGOS Logistics Trust, or ALOG, over a key hurdle.

In October, ESR-REIT proposed acquiring ALOG, for a total consideration of around S$1.4 billion in cash and shares, in a deal which will create an industrial REIT with around S$5.4 billion in assets across Singapore and Australia.

Under the deal, for each ALOG unit, ESR-REIT will pay S$0.095 a unit in cash and 1.6765 new ESR-REIT units issued at S$0.51 each, for a total of S$0.95 a unit.

However, some analysts have since criticized the deal as coming up short on ALOG’s value, noting that the consideration should be valued at S$0.8746 a unit, which would be lower than ALOG’s traded price as the unit consideration portion of the offer overvalues ESR-REIT’s units.

Units of ALOG closed Wednesday at S$0.91, up 2.25 percent, while ESR-REIT ended unchanged at S$0.48. Singapore’s market was closed Thursday for the Deepavali holiday.

The combined REIT, to be called ESR-LOGOS REIT, or E-LOG, would hold a portfolio of logistics/warehouse, high-specification industrial properties, business parks and general industrial properties, with the combination set to be among the top 10 largest Singapore REITs (S-REITs) by free-float market capitalization, ESR-REIT has previously said.