Federation Centres and Novion Property Group have entered a merger agreement that will create a $22 billion real estate investment trust.
The merged entity will have a market capitalisation of over $11bn, and will include management of 102 retail assets worth $22bn, with over $18.2bn in annual retail sales.
The merger will be subject to Novion shareholder approval, with Federation acting as the suitor. Both company boards support the deal, which is also subject to FIRB approval.
Federation Centres have offered 0.8225 shares for each Novion security, which values Novion at $2.55 a share -- up 9 per cent from where they last changed hands at $2.32.
Based on this ratio, existing Novion shareholders will own 64 per cent of the group, with Federation shareholders controlling the latter 36 per cent.
Current Novion independent non-executive director, Peter Hay will be the new group's chairman, while Federation chief executive Steven Sewell will take the same role of the merged identity.
The total transaction cost is expected to come in at $485m, but is expected to bring net cost savings of at least $84m a year.
Shareholders are set to benefit from the new group, and will see significant earnings and distribution accretion. Novion shareholders will see a 2015 financial year pro-forma earnings and dividend per share of 14.6 per cent and 8.9 per cent respectively, while Federation stakeholders will see earnings per share increase 5.8 per cent and dividends rise by 8.1 per cent.
Novion is being advised on the merger by Macquarie Capital, while Merrill Lynch and UBS are advising Federation.