FLT-FCOT merger: Will market ethos trump fairness?

A FORTNIGHT ago, this column took a close look at the proposed merger of CapitaLand Mall Trust and CapitaLand Commercial Trust. Since then, some investors have asked what I think of the proposed merger of Frasers Logistics & Industrial Trust (FLT) and Frasers Commercial Trust (FCOT).

The short answer to the question is that the merger plainly favours FLT at the expense of FCOT. So, in the name of fairness and their own long-term self-interest, I am inclined to tell unitholders of FCOT to vote against it. Yet, if the market price of FLT units continues rallying, many FCOT unitholders might end up acting in their immediate self-interest and vote in favour of the merger on March 11.

There are two steps to the merger transaction. First, FCOT is to be acquired by FLT for a total implied consideration of S$1.68 per unit, satisfied by S$0.151 in cash and the issue of 1.233 new FLT units at S$1.24 each. Then, it is proposed that the enlarged Reit will acquire from its sponsor Frasers Property Ltd (FPL) a 50 per cent stake in Farnborough Business Park (FBP) for £90.1 million (S$163.1 million). The other 50 per cent stake in FBP is currently held by FCOT.