Fund manager Fife Capital rebuffed a proposal from rival manager 360 Capital Group to merge its Australian Industrial REIT with the 360 Capital Industrial Fund, citing “significant concerns” over the all-scrip offer.
The Tony Pitt-led 360 Capital lobbed the merger bid in mid-December after acquiring 12.9 per cent of the trust for $27 million. The trust has a portfolio of industrial property worth $308m.
Fife Capital said yesterday that it had reviewed the proposal after requesting further information, which it did not receive.
Concerns with the merger included a “lack of compelling strategic benefits” for existing Australian Industrial REIT unitholders, it said, as well as the all-scrip nature of the deal, which would have seen unitholders receive 0.89 units in the 360 Capital Industrial trust for each share.
“Accordingly (Fife Capital) has determined not to further engage with (360 Capital) in relation to the scheme proposal,” the company said.
The offer included only a small premium for shareholders, Fife Capital added.
Both funds, along with the APN Property Group-run Industrial REIT, were part of a wave of new trusts that burst on to the Australian Securities Exchange in late 2013.
However, with a competitive direct property market, some fund managers and executives are tipping that there will be an uptick in merger and acquisition activity for the sector this year.
In December, Dexus Property Group’s chief executive, Darren Steinberg, said there was a disconnect between the direct and listed property market that left some listed trusts looking underpriced.
“Recent small-cap floats are also likely to be subject to consolidation should they trade at a discount to net tangible assets,” Mr Steinberg said.
The 360 Capital Industrial Fund has a portfolio of 21 assets worth $501m, with a possible merger creating an $800m fund that would be better able to compete for assets against overseas players as well as sector giants Goodman Group, Dexus, Stockland and Mirvac.
The Pitt-run 360 Capital Industrial Fund is well positioned for any corporate activity after unveiling a 4.2 per cent upgrade to its fiscal 2015 distributions on the back of high occupancy levels.
Last year, Australian Industrial REIT returned to the market for a capital raising that allowed it to grow to 16 industrial properties, largely focused on logistics and distribution centres.
But 360 Capital has also said it would launch a full takeover for the Fife-run fund based on a similar all-scrip offer, at an implied price of $2.19 a share, if the fund managers failed to strike a merger agreement. A formal bidder’s statement is expected to be sent to unitholders early next month.
ANI shares traded as high as $2.22 in yesterday, although they finished down 0.46 per cent at $2.18, while 360 Capital Industrial Fund shares closed unchanged at $2.47. Fife Capital has sought advice from UBS and Fort Street Advisors, while 360 Capital has retained Moelis Australia for the transaction