RECOMMENDED ALL-SHARE OFFER FOR
CT PROPERTY TRUST LIMITED (“CTPT”)
BY
LONDONMETRIC PROPERTY PLC (“LONDONMETRIC”)
to be effected by means of a Court-sanctioned scheme of arrangement
under Part VIII of the Companies Law of Guernsey
Summary
· The boards of directors of LondonMetric and CTPT are pleased to announce that they have reached agreement on the terms of a recommended all-share offer pursuant to which LondonMetric will acquire the entire issued and to be issued share capital of CTPT (the “Acquisition“).
· Under the terms of the Acquisition, CTPT Shareholders will be entitled to receive:
for each CTPT Share: 0.455 New LondonMetric Shares
· On the basis of the Closing Price per LondonMetric Share of 188.0 pence on 23 May 2023 (the “Latest Practicable Date“), the Acquisition values each CTPT Share at 85.5 pence and the entire issued and to be issued ordinary share capital of CTPT at approximately £198.6 million.
· The Acquisition represents:
o a premium of approximately 34.3 per cent. to the Closing Price per CTPT Share of 63.7 pence on the Latest Practicable Date;
o a premium of approximately 33.2 per cent. to the three-month volume weighted average price per CTPT Share of 64.2 pence (being the volume weighted average Closing Price for the three-month period ended on the Latest Practicable Date); and
o on a NTA-for-NTA basis, a discount of approximately 6.3 per cent. to CTPT’s last reported EPRA NTA per CTPT Share of 96.6 pence as at 31 March 2023 based on LondonMetric’s last reported EPRA NTA per LondonMetric Share of 198.9 pence as at 31 March 2023.
· Following completion of the Acquisition, existing LondonMetric Shareholders will hold approximately 90.3 per cent. and CTPT Shareholders will hold approximately 9.7 per cent. of the enlarged issued share capital of LondonMetric.
· It is intended that the Acquisition will be effected by means of a Court-sanctioned scheme of arrangement under Part VIII of the Companies Law of Guernsey (the “Scheme“).
Background to, and reasons for, the Acquisition
· LondonMetric is a FTSE 250 listed internally managed “UK-REIT” that owns one of the UK’s leading listed logistics platforms alongside a grocery-led long income portfolio and has a market capitalisation of £1,848.0 million as at the Latest Practicable Date. As at 31 March 2023, it owns approximately £3.0 billion of real estate assets across a 16.1 million sq. ft. portfolio generating £145.2 million per annum of contracted rental income. LondonMetric’s last reported NTA per LondonMetric Share was 198.9 pence as at 31 March 2023. LondonMetric’s objective is to own and manage desirable real estate that meets occupiers’ demands, delivers reliable, repetitive and growing income-led returns and outperforms over the long term.
· The boards of both CTPT and LondonMetric believe that the Acquisition will have compelling strategic and financial rationale for shareholders in both LondonMetric and CTPT. In particular:
– both companies have complementary and high quality property portfolios with a similar focus on income and income growth;
– the Acquisition will create a larger and more resilient Combined Group with gross property assets (including shares in joint ventures) of approximately £3.3 billion, comprising 71.5 per cent. distribution and industrial assets, resulting in a combined property portfolio of 313 properties with greater income diversification and total contracted rental income of £163.4 million per annum;
– by combining the two complementary property portfolios, LondonMetric anticipates that it will be able to unlock operational synergies and accelerate identified asset management opportunities; and
– the Acquisition is expected to be earnings accretive for the Combined Group through economies of scale and cost efficiencies with rental reversion and portfolio initiatives expected to deliver further benefits which are expected to lead to dividend progression over the medium term building on LondonMetric’s eight year track record of dividend growth[1].
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[1] The statement that the Acquisition is expected to be earnings accretive is not intended as a profit forecast and should not be construed as such and is not subject to the requirements of Rule 28 of the Takeover Code. The statement should not be interpreted to mean that the earnings per share in any future fiscal period will necessarily match or be greater than those for the relevant preceding financial period.
· This Announcement contains property valuations supported by valuation reports for CTPT and LondonMetric as at 31 March 2023 pursuant to the requirements of Rule 29 of the Takeover Code.
Background to and reasons for the CTPT Directors recommendation
· IRP Property Investments Limited (“IRP”) merged with ISIS Property Trust Limited (“IPT”) in April 2013 to form CTPT, then named F&C UK Real Estate Investments Limited. CTPT is an externally managed UK-REIT that invests principally in three UK commercial property sectors: (i) industrials, logistics and distribution; (ii) retail (including retail warehouses); and (iii) offices.
· As at 31 March 2023, CTPT’s property portfolio comprised 34 properties valued at approximately £288.3 million, 56.0 per cent. of which comprised industrials, logistics and distribution assets, 21.9 per cent. retail warehousing, 15.7 per cent. offices and 6.4 per cent. high street retail assets. CTPT also had approximately £30.8 million of cash available as at 31 March 2023.
· CTPT has generated a NTA total return of 99.4 per cent. over the approximately ten-year time horizon since the merger of IRP and IPT.
· However, despite the performance of the underlying portfolio, CTPT, along with other diversified UK-REITs, faces a number of headwinds. CTPT is seen as being sub-scale and not sufficiently differentiated to attract new long-term investors and therefore has traded at a double digit discount to NTA for a number of years now.
· CTPT Shares have traded at an average discount to NTA of 25.3 per cent. in the last five years and based on the Closing Price per CTPT Share on the Latest Practicable Date were trading at a 34.1 per cent. discount to NTA.
· The board of CTPT believes that, in the context of the material and persistent discount to NTA at which the CTPT Shares continue to trade, CTPT is unlikely in the short to medium term to overcome the challenges it faces as an independent UK-REIT.
· The CTPT Directors have therefore considered a number of options and concluded that the Acquisition will address the issues of CTPT’s scale and liquidity whilst offering CTPT Shareholders continued exposure to a complementary and high quality property portfolio via a large UK-REIT that has a strong record of paying growing and covered dividends.
· As such, following careful consideration, the CTPT Directors intend to recommend unanimously the Acquisition to CTPT Shareholders. The CTPT Directors considered the following in arriving at this decision:
· Based on the Closing Prices on the Latest Practicable Date, the Acquisition implies an offer price of 85.5 pence per CTPT Share which represents:
o a premium of approximately 34.3 per cent. to the Closing Price per CTPT Share of 63.7 pence on the Latest Practicable Date;
o a premium of approximately 33.2 per cent. to the three-month volume weighted average price per CTPT Share of 64.2 pence (being the volume weighted average Closing Price for the three-month period ended on the Latest Practicable Date); and
o on an NTA-for-NTA basis, a discount of approximately 6.3 per cent. to CTPT’s last reported EPRA NTA per CTPT Share of 96.6 pence as at 31 March 2023 based on LondonMetric’s last reported EPRA NTA per LondonMetric Share of 198.9 pence as at 31 March 2023;
· the Acquisition provides CTPT Shareholders with the opportunity to remain invested through the Combined Group, and benefit from a company:
o which has traded at an average premium to EPRA NTA of 11.7 per cent. over the five year period to 31 March 2023 and which, as at the Latest Practicable Date is trading at a 5.5 per cent. discount to its last reported EPRA NTA per LondonMetric Share of 198.9 pence as at 31 March 2023;
o over the ten year period to 31 March 2023, LondonMetric has delivered a total accounting return of 156.0 per cent.; and
o in respect of its financial year ended 31 March 2023, has declared total dividends of 9.5 pence per LondonMetric Share, with dividend cover of 109 per cent., and since 2013 LondonMetric has paid a total of 87.0 pence of dividends to its shareholders;
· CTPT Shareholders will benefit from LondonMetric’s enhanced scale, enjoying (i) better and cheaper access to financing, (ii) an internal management structure with strong alignment to the performance of the Combined Group resulting from significant executive share ownership, (iii) an efficient cost structure with a low EPRA cost ratio and (iv) significantly improved liquidity in the trading of its shares; and
· the Acquisition provides CTPT Shareholders the opportunity to crystallise a significant premium to the CTPT Share price whilst remaining invested in an independent UK-REIT as part of a larger Combined Group which will continue to focus on delivering enhanced income led total returns for its shareholders in accordance with LondonMetric’s objective.
Recommendation
· The CTPT Directors, who have been so advised by Panmure Gordon as to the financial terms of the Acquisition, unanimously consider the terms of the Acquisition to be fair and reasonable. In providing its advice to the CTPT Directors, Panmure Gordon has taken into account the commercial assessments of the CTPT Directors. Panmure Gordon is providing independent financial advice to the CTPT Directors for the purposes of Rule 3 of the Takeover Code.
· Accordingly, the CTPT Directors intend to recommend unanimously that CTPT Shareholders vote in favour of the Scheme at the Court Meeting and vote in favour of the CTPT Resolution at the CTPT General Meeting (or, in the event that the Acquisition is implemented by way of a Takeover Offer, to accept or procure acceptance of the Takeover Offer), and have irrevocably undertaken to do so in respect of their own beneficial holdings totalling in aggregate 211,689 CTPT Shares, representing approximately 0.1 per cent. of the issued share capital of CTPT as at the Latest Practicable Date.
Irrevocable undertakings
· In addition to the irrevocable undertakings given by the CTPT Directors as set out above, LondonMetric has received irrevocable undertakings to vote in favour of the Scheme at the Court Meeting, and in favour of the CTPT Resolution to be proposed at the CTPT General Meeting (or, in the event that the Acquisition is implemented by way of a Takeover Offer, to accept or procure acceptance of the Takeover Offer), from TR Property Investment Trust plc and Ravenscroft Limited in respect of, in aggregate, 26,284,331 CTPT Shares representing approximately 11.3 per cent. of CTPT’s issued share capital as at the Latest Practicable Date.
· LondonMetric has therefore received irrevocable undertakings from the CTPT Directors and certain other CTPT Shareholders in respect of, in aggregate, 26,496,020 CTPT Shares representing approximately 11.4 per cent. of CTPT’s issued share capital as at the Latest Practicable Date.
· Further details of the irrevocable undertakings given to LondonMetric (and the circumstances in which such arrangements will cease to be binding or otherwise fall away) are set out in Appendix 3 to this Announcement.
Dividends
· On 24 May 2023, CTPT announced its third quarterly interim dividend in respect of the year ending 30 June 2023 (the “CTPT Third Quarterly Interim Dividend“) of 1.0 pence per CTPT Share. The CTPT Third Quarterly Interim Dividend is due to be paid on 30 June 2023 to CTPT Shareholders on the register of members on 16 June 2023. CTPT Shareholders will be entitled to receive and retain the CTPT Third Quarterly Interim Dividend in full.
· On 24 May 2023, LondonMetric announced a fourth quarterly dividend for the year ended 31 March 2023 of 2.6 pence per LondonMetric Share (the “LondonMetric Fourth Quarterly Dividend“). On the basis of the expected dividend payment timetable only existing LondonMetric Shareholders will be entitled to receive and retain the LondonMetric Fourth Quarterly Dividend.
· Other than the CTPT Third Quarterly Interim Dividend (or any other permissible dividends as described in paragraph 9 below), if any dividend or other distribution is authorised, declared, made or paid in respect of CTPT Shares on or after the date of this Announcement and with a record date on or before the Effective Date, LondonMetric reserves the right to reduce the consideration payable for each CTPT Share under the Acquisition accordingly by reference to the amount per CTPT Share of all or part of any such dividend or other distribution.
Timetable and conditions
· It is intended that the Acquisition will be implemented by way of a Court-sanctioned scheme of arrangement under Part VIII of the Companies Law of Guernsey. However, subject to the Panel’s consent, LondonMetric reserves the right to elect to implement the Acquisition by way of a Takeover Offer.
· The Acquisition will be put to CTPT Shareholders at the Court Meeting and at the CTPT General Meeting. In order to become Effective, the Scheme must be approved by a majority in number of Scheme Shareholders voting at the Court Meeting, either in person or by proxy, representing at least 75 per cent. in value of the Scheme Shares voted by Scheme Shareholders at the Court Meeting. In addition, a special resolution to approve all actions necessary for carrying the Scheme into effect and the adoption of the Amended CTPT Articles must be passed by CTPT Shareholders representing at least 75 per cent. of the votes cast on that resolution at the CTPT General Meeting.
· The Acquisition will be made in accordance with the Takeover Code and on the terms and subject to the Conditions which are set out in Appendix 1 to this Announcement and on the further terms and conditions that will be set out in the Scheme Document.
· It is expected that the Scheme Document, containing further information about the Acquisition and notices of the Court Meeting and the CTPT General Meeting, together with the Forms of Proxy will be published as soon as practicable and, in any event, within 28 days of this Announcement, unless CTPT and LondonMetric otherwise agree, and the Panel consents, to a later date. It is expected that the Scheme will become Effective by early July 2023, subject to the satisfaction of the Conditions and the further terms set out in Appendix 1 to this Announcement and to the full terms and conditions of the Acquisition which will be set out in the Scheme Document.
Commenting on the Acquisition, Davina Walter, Chairman of CTPT, said:
“Our Company’s investment strategy has delivered strong portfolio returns for shareholders since the merger of IRP Property Investments Limited and ISIS Property Trust Limited in April 2013. Our manager, Columbia Threadneedle, has built an attractive UK commercial property portfolio and pivoted the balance of the portfolio in recent years to a high industrials weighting, reflecting our conviction in the ongoing strong occupier demand in the sector.
“LondonMetric also has a portfolio with a high exposure to the industrials sector and a proven track record in delivering returns from this asset class. The portfolio fit is compelling.
“Despite the progress made in pivoting the portfolio, excellent long term portfolio performance and regular dividend payments, CTPT has traded at a double digit discount to NAV for a number of years. We believe this is reflective of our small size and external market conditions.
“This Acquisition by LondonMetric allows our shareholders to benefit from being exposed to an enlarged UK-REIT with an approximately £3 billion property portfolio, continuously growing dividends and an outstanding track record of shareholder value creation. The Acquisition also represents a compelling premium to the CTPT Share Price. We therefore recommend the Acquisition to shareholders.”
Commenting on the Acquisition, Patrick Vaughan, Chairman of LondonMetric, said:
“We believe the Acquisition is compelling for both CTPT and LondonMetric Shareholders. The CTPT management team has assembled a high quality platform of complementary assets, diversified by tenant base and geography and with significant reversionary potential.
“The Acquisition grows the Combined Group’s exposure to the winning sectors of urban logistics and long income, underpinned by evolving consumer demand and delivering strong rental growth.
“In the current interest rate environment, we believe resilient cash flows, scale and liquidity will be the defining characteristics that differentiate the winners and the losers. The income and income growth characteristics of the CTPT portfolio, combined with select asset management opportunities, should enhance our total return focus, whilst enabling us to drive earnings optimisation and maintain our progressive dividend policy.”