ESR-REIT (ESRR.SI) will buy rival Viva Industrial Trust (VIVA.SI) in a proposed deal valued at S$936.7 million, marking the first consolidation among Singapore’s crowded mid-cap real estate investment trusts.
The proposed merger will create the fourth largest industrial REIT in Singapore with about S$3.0 billion ($2.23 billion) in assets, the two firms said in a joint statement on Friday.
Under deal terms, Viva security holders will receive S$0.96 per stapled security, which will be paid 10 percent in cash and 90 percent through the issue of new ESR-REIT units. The proposed deal represents an 8 percent premium to Viva’s closing price on Thursday.
Talks have been ongoing for months as ESR-REIT, which is backed by Asian logistics developer e-Shang Redwood (ESR) – a venture of private equity firm Warburg Pincus and global investors, saying in January its manager submitted a proposal to merge it with Viva.
The property portfolio of both companies comprise general industrial, logistics, warehouses and business parks.
Analysts say Singapore’s industrial REITs sector is ripe for consolidation as it is crowded with smaller companies finding it challenging to grow in the last few years.
“Size does matter in REITs,” said Adrian Chui, chief executive officer of ESR-REIT, adding the deal will help create a sizeable and more liquid REIT, backed by a strong developer-sponsor. It remained open to evaluating more partnerships, he said.
Trading in units of both ESR-REIT, which has a market capitalization of about S$830 million ($618 million), and Viva, valued at about S$865 million, were halted ahead of the news.
The manager of ESR-REIT will also buy Viva’s manager for S$62 million.
Citigroup Global Markets Singapore Pte Ltd, RHB Securities Singapore and United Overseas Bank Limited are the financial advisers to the ESR-REIT manager. BofA Merrill Lynch is the financial adviser to Viva managers.