Ara Logos Logistics Trust, ESR-Reit to vote on merger on Mar 21

Singapore

UNITHOLDERS of Ara Logos Logistics Trust (ALog Trust) K2LU and ESR-Reit J91U will convene to vote on the proposed merger of the 2 real estate investment trusts (Reits) by way of a trust scheme arrangement on Mar 21, the Reits announced on Friday (Feb 25).

ESR-Reit will go first, holding its extraordinary general meeting (EGM) via electronic means on Mar 21 at 10 am.

This will be followed by ALog Trust's EGM at 3 pm on the same day, also via electronic means.

The scheme meeting among the 2 Reits' managers and trustees will then take place at 3.30 pm via electronic means, following the conclusion of the EGMs.

In separate press statements on Friday, both Reit managers have reiterated the illustrative value of the merger and recommended that unitholders vote in favour of the merger.

Adrian Chui, chief executive officer (CEO) and executive director of ESR-Reit's manager, said: "This merger is critical as it addresses the issue of overlapping mandates and potential conflicts while allowing the enlarged ESR-Logos Reit to leverage the sponsor's resources to drive our growth trajectory, thereby safeguarding the interest of both sets of unitholders."

Karen Lee, CEO of the manager of ALog Trust, said: "This proposed transaction is intended as a strategic merger and not a complete sell-out of ALog Trust and/or its underlying assets, as we believe the proposed merger will allow our unitholders to enjoy multiple benefits, which one cannot enjoy in a direct sell-out."

The Reits have also issued a revised scheme document on Friday, detailing the scheme consideration of S$0.097 in cash and 1.7729 new ESR-Reit units for each ALog Trust unit, that ALog Trust unitholders will receive should the merger proceed.

To disseminate information to unitholders and answer questions, the managers of ALog Trust and ESR-Reit have organised separate virtual information sessions about the merger, each to be facilitated and moderated by the Securities Investors Association (Singapore).

ALog Trust's information session will take place on Mar 9 from 7 pm, while ESR-Reit's session will take place on Mar 10 from 7 pm. Both sessions will include the respective CEOs of the Reit managers delivering a presentation on the proposed merger, followed by a live question and answer session.

The merger was first announced on Oct 15, 2021, following the proposed merger of the 2 Reits' sponsors, ESR Cayman and Ara Asset Management. The "mothership merger" between ESR and Ara was completed in January 2022.

The merger between ESR-Reit and ALog Trust had initially come with a lower scheme consideration of S$0.095 in cash and 1.6765 in ESR-Reit units for every ALog Trust unit, but following recommendations by proxy advisory services Glass Lewis and Institutional Shareholder Services for ALog Trust unitholders to vote against the merger, the scheme consideration had been revised.

Based on the 1-month volume weighted average price of S$0.4716 per ESR-Reit unit up to Oct 14, 2021 - being the last trading day prior to the announcement of the proposed merger - the consideration per ALog Trust unit would be S$0.933. This is 5.3 per cent higher than the value of S$0.886 previously.

The proxy advisers had cited process and pricing issues, with Glass Lewis saying the terms of the scheme consideration were unfavourable to ALog Trust unitholders as they imply a discounted market valuation for their units.

"Now, the real reason why we actually improved the revised offer is that this conflict of interest is now real," Chui said at a briefing on Friday. "I could walk away from it; I have walked away from mergers before. But I don't want to walk away from this one because the downside of not addressing this conflict of interest is more detrimental."

In a separate briefing on Friday, Lee said there is no feedback from the proxy advisers yet regarding the revised offer as the proxy advisers typically wait until the scheme document is published before conducting their review. However, she added that the merits of the proposal "generally have been well acknowledged by (ALog Trust's) unitholders".

"We need to look at the overlapping mandates and conflicts of interest between the two Reits seriously," Lee said. "We hope our unitholders, besides looking at the improved financial terms, will also consider the merits of the proposed merger holistically and continue with us on this exciting pathway ahead."

Units of ESR-Reit closed up 1.2 per cent or S$0.005 at S$0.43, while ALog Trust units ended at S$0.835, up 0.6 per cent or S$0.005, on Friday.