Price tag for ALog-ESR merger raised by 2%; EGM and scheme meeting deferred

THE scheme consideration for the proposed merger of Ara Logos Logistics Trust K2LU and ESR-Reit J91U has been raised to S$0.097 in cash and 1.7729 in ESR-Reit units for every ALog unit, from S$0.095 in cash and 1.6765 in ESR-Reit units previously.

The higher offer works out to a 2.1 and 5.7 per cent rise respectively for the cash and unit portions. The new price tag for the proposed merger is S$0.97 per ALog unit, based on an issue price of S$0.4924 per ESR-Reit unit. The previous consideration was S$0.95 per ALog unit, but based on a higher issue price of S$0.51 per ESR-Reit unit.

Units of ESR-Reit had closed flat at S$0.47 on Friday, while ALog units had gained S$0.005 or 0.6 per cent to close at S$0.90.

In an announcement on Saturday (Jan 22), the managers of both Reits said the new consideration would put the illustrative value of the scheme consideration at S$0.933 per ALog unit based on the volume-weighted average price (VWAP) for ESR-Reit units over the last month of S$0.4716. This represents a 5.3 per cent increase from the original proposal of S$0.886 per ALog unit.

The historical pro forma distribution per unit accretion to ALog unitholders increases from 8.2 per cent to 12.8 per cent, and the historical pro forma net asset value per unit accretion increases from 2.2 per cent to 5.3 per cent.

The increased consideration comes after proxy advisory services Institutional Shareholder Services and Glass Lewis this month recommended unitholders of ALog vote against the merger with ESR-Reit, citing process and pricing issues.

Glass Lewis had said in its report that the terms of the terms of the scheme consideration are unfavourable to ALog unitholders as they imply a discounted market valuation for ALog's units.

The issue price of S$0.51 per ESR-Reit unit was close to ESR-Reit's 52-week high of S$0.52, but at a significant premium to ESR-Reit's unit price of S$0.465 ahead of the merger announcement as well as to VWAPs over several other time periods.

In a statement accompanying the announcement, the chief executive of ALog's manager Karen Lee said: "We continue to believe that the merger is beneficial for the growth of both ALog and ESR-Reit... especially with the completion of the acquisition of Ara Asset Management, which includes our sponsor Logos Group, by ESR Cayman."

ALog's manager noted the potential overlapping mandates of the 2 real estate investment trusts would result in "evident conflicts of interest, impeding growth".

The extraordinary general meeting and the scheme meeting to vote on the proposed merger have been deferred. The new date will be announced in due course.

READ MORE:

• ARA Logos unitholders must weigh pure-play logistics status against being part of a larger entity
• ARA Logos minorities may support merger with ESR-Reit, but not because it's a good deal
• BT Explains: What you need to know about the ALog Trust-ESR-Reit merger