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LXi REIT PLC shareholders on Wednesday were showing disapproval of the company's planned acquisition of smaller peer Secure Income REIT PLC.
LXi was down 4.5% at 135.78 pence, while the wider FTSE 250 index was up 1.2%. By contrast, Secure Income shares rose 8.8% to 447.00p, giving the AIM listing a market cap of about £1.45 billion.
The two real estate investment trusts both are London-based and both focus on UK commercial property. For Secure Income, this includes 11 private hospitals and the Alton Towers and Thorpe Park amusement parks.
The merger will see Secure Income shareholders receive 3.32 new LXi shares for each Secure Income share they hold. At LXi's closing price of 142.2 pence on Tuesday, this values Secure Income at £1.5 billion.
LXi noted a partial cash alternative will be offered, where Secure Income shareholders can receive 118.88p and 2.488 new LXi shares. The total cash being offered is capped at £385 million.
Once the deal is completed, LXi shareholders will own about 53% of the new, enlarged company.
LXi expects cost savings at around £8.6 million per year, partly due to the unification of investment advisory services, it said. It also sees the planned combined group to have one of the lowest total expense ratios in the UK listed retail sector.
Secure Income's Chair Martin Moore said the combination of the two portfolios will result in ‘further diversification, significant growth opportunities, access to lower cost of capital, potentially increased share trading liquidity and lower management costs on a faster timescale than we would otherwise achieve.’
LXi Chair Cyrus Ardalan commented the merger ‘will create a substantial, complementary portfolio of attractive operating assets let on long-term, index-linked leases to a diverse group of strong tenants across a diversified mix of robust property sectors.’
The boards of both companies have unanimously recommended the deal.
‘The boards of LXi and SIR believe there is a strong strategic, operational and financial rationale for the merger, bolstering the existing highly attractive investment case of each business to create a more compelling investment case for the combined group,’ the pair said in a statement.
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