Quarz seeks MAS intervention; says MNACT manager has fiduciary duty to seek better price
ACTIVIST fund manager Quarz Capital Management has sent a letter to the Monetary Authority of Singapore (MAS), asking the latter to ensure that the manager of Mapletree North Asia Commercial Trust (MNACT) RW0U fulfils its fiduciary duty to unitholders of the real estate investment trust (Reit).
MNACT and sister Reit Mapletree Commercial Trust (MCT) N2IU had on Dec 31 proposed a merger of both Reits. The merger has been criticised by unitholders on both sides.
Quarz has said it thinks the deal undervalues MNACT's assets. In its letter, the activist asset manager called it "puzzling" that MNACT's manager did not "conduct a robust and transparent sale process and (did) not seek or solicit offers from other parties to obtain the best possible price in line with its fiduciary duty to protect the interest of its unitholders".
Quarz also noted that both parties have the same sponsor in Mapletree Investments.
"We respectfully and urgently seek MAS support to protect unitholders' interest by ensuring that the MNACT manager fulfils its fiduciary duty and negotiates a better offer with the MCT manager or conducts a robust and transparent process where all third parties can undertake due diligence and bid in a fair and unbiased process for MNACT assets," it added.
The proposed trust scheme would see MNACT unitholders receive a scheme consideration of S$1.1949 for each MNACT unit held - either in the form of 0.5963 new MCT units at an issue price of S$2.0039 apiece, or a combination of 0.5009 consideration units and S$0.1912 in cash.
This implies a gross exchange ratio of 0.5963 times.
With MCT trading at an average of S$1.83 per unit in the year to date, Quarz noted this implies that the offer price for MNACT is around S$1.10.
Quarz questioned whether the manager of MNACT would have recommended to sell the Reit at the same value of S$1.10 per unit if the merger talks were not with related party MCT but with a third party.
"The proposed offer price is at a substantial discount of about 11 per cent and 13 per cent to MNACT's net asset value (NAV) of S$1.23 and S1.27 in October 2021 and March 2021," Quarz said.
"Many MNACT unitholders are retirees and retail investors who have invested in MNACT pre-Covid-19 and at higher prices to the current inferior offer. They depend on this investment for their retirement income. The current value destructive offer will lock them at a permanent discount and loss in the enlarged entity with a substantial cut in (distributions) per unit," Quarz added.
The manager of MNACT had said in an earlier bourse filing that it will not seek or solicit competing bids for the duration of the implementation agreement.
It noted that the granting of exclusivity is common in precedent trust scheme transactions in Singapore.
The manager said the proposed merger is the only offer that has been received for the entire portfolio to date.
However, it added that it will consider any third party offer for the Reit or assets which it receives.
The Business Times has reached out to MAS for comment.
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