Mapletree Commercial, MNACT respond to Quarz letter on merger deal terms

The Festival Walk property located in Hong Kong. Mapletree North Asia Commercial Trust (MNACT) and Mapletree Commercial Trust agreed in December 2021 to merge to form Mapletree Pan-Asia Commercial Trust. Credit: Mapletree North Asia Commercial TrustThe Festival Walk property located in Hong Kong. Mapletree North Asia Commercial Trust (MNACT) and Mapletree Commercial Trust agreed in December 2021 to merge to form Mapletree Pan-Asia Commercial Trust. Credit: Mapletree North Asia Commercial Trust

Both Mapletree Commercial Trust and Mapletree North Asia Commercial Trust (MNACT) responded Friday to criticism of the terms of their proposed merger by significant shareholder, Quarz Capital Management.

Mapletree Commercial Trust noted, “Quarz acknowledges the deal rationale … and sees value in MNACT.”

MNACT also highlighted that “Quarz regards positively the strategic rationale of the proposed merger.”

The rationale and terms of the proposed merger have been carefully considered, and we continue to believe these to be beneficial to unitholders, both from a strategic and financial perspective,” MNACT added. 

MNACT added that the scheme document for the deal was expected to be released by end-March, and it would contain the recommendations of its independent directors, which would consider market conditions, the independent financial adviser’s opinion and other relevant factors. 

Quarz’s open letter

In the open letter open letter dated 9 February, Quarz said it opposed the terms of the merger between Mapletree Commercial Trust and Mapletree North Asia Commercial Trust (MNACT), calling it “opportunistic, inadequate and value destructive to MNACT unitholders.”

But the Singapore-based activist investor added it believed the proposed merger is “highly compelling and will potentially create a powerful Pan Asian real estate platform.”

Travis Lundy of Quiddity Advisors, who publishes on Smartkarma, said in a note Friday that Quarz’s arguments “boil down to ‘pay me more,’ and the explanations are “a little disingenuous.” 

Apples to oranges?

While Lundy said he saw nothing wrong with urging unitholders to unite and negotiate for a better price, Quarz’s comparisons weren’t exactly apples-to-apples. 

“If you are going to say one REIT is going to see its assets rebound because of post-Covid increase in activity, and you are comparing that to another REIT, you should actually compare it to the other REIT rather than assuming the other REIT will see no post-Covid increase in activity. Temporary Covid weakness exists for both REITs here,” Lundy said. 

In late December, the two trusts announced a plan to merge into Mapletree Pan-Asia Commercial Trust in a S$4.22 billion deal, creating one of Asia’s top-10 largest REITs with assets across Singapore, South Korea, China, Hong Kong and Japan.

Under the deal, which will be a trust scheme of arrangement, unitholders of MNACT will receive S$1.1949 for each unit, to be paid by either 0.5963 new MCT unit issued at S$2.0039, or a combination of 0.5009 MCT unit and S$0.1912 in cash.

Quarz told Shenton Wire it and its affiliates are among the top-10 unitholders of MNACT; Quarz said its assets under management is around S$210 million.