Proposed S$1.58b merger between Frasers' Reits on 'normal commercial terms': IFA

THE independent directors of both Frasers Logistics Trust's (FLT) and Frasers Commercial Trust's (FCOT) managers have recommended that their respective unitholders vote in favour of the proposed S$1.58 billion merger between the two real estate investment trusts (Reits).

This comes as each manager's independent financial adviser (IFA) has advised the independent directors to give the recommendation, in separate documents issued to unitholders on Friday morning.

The meetings to seek approval from both Reits' unitholders will be convened on March 11 at the Suntec Singapore Convention & Exhibition Centre. FLT's extraordinary general meeting (EGM) will take place at 10am while FCOT's EGM and trust scheme meeting will be held at 2.30pm.

FLT's IFA, Deloitte & Touche, said in a circular on Friday that the proposed merger and the proposed acquisition of Farnborough Business Park are on "normal commercial terms" and are "not prejudicial" to the interests of FLT and its minority unitholders.

FLT's independent directors also recommended FLT unitholders vote in favour of acquisition at the EGM, on Deloitte's advice.

Meanwhile, FCOT's IFA, Evercore, said in a scheme document that it found the scheme consideration "fair and reasonable" from a financial point of view.

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One of the factors Evercore considered is that the scheme consideration represents a premium of about 0.6 per cent over the closing price of FCOT units on Nov 27, 2019. It also represents a premium of 3.57 per cent, 3.09 per cent, 3.54 per cent and 8.21 per cent over the volume weighted average price of FCOT units for the one-month, three-month, six-month and 12-month periods prior to and including Nov 27, 2019.

FLT and FCOT in December 2019 proposed to merge by way of a trust scheme of arrangement which will see FLT acquiring all units of FCOT for about S$1.54 billion.

For each FCOT unit they hold, FCOT unitholders will receive S$0.151 in cash and 1.233 new FLT units at an issue price of S$1.24 apiece. This means FCOT unitholders will be paid a scheme consideration of S$1.68 for each FCOT unit held, which implies a gross exchange ratio of 1.355 times.

The total cost of the merger will be around S$1.58 billion. This includes the S$1.54 billion scheme consideration, which FLT will pay with a mix of cash and the issuance of new FLT units to FCOT unitholders.

If the merger goes through, sponsor Frasers Property and its related groups are expected to own a 21.9 per cent stake in the enlarged Reit. Other FCOT unitholders are expected to hold 24.6 per cent, while other FLT unitholders are expected to hold 53.5 per cent.

As at 11.35am, FLT units were trading at S$1.31, up one Singapore cent or 0.8 per cent, while FCOT units were trading flat at S$1.70.