In major news on UK stocks, Tritax Big Box REIT PLC (GB:BBOX) and UK Commercial Property REIT Ltd. (GB:UKCM) have agreed to the terms of an all-share merger deal for £900 million, creating the fourth-largest REIT (real estate investment trust) in the UK. This deal was initially announced in February. The combined entity will have a market capitalization of £3.9 billion and a portfolio of £6.3 billion.
Tritax Big Box shares surged by over 2% following the announcement of this news, while UKCM stock was trading up around 5% as of writing.
Tritax specializes in investing in Big Box distribution centres. Meanwhile, UKCM is focused on investing in commercial properties across the UK.
Details of the Deal
As part of the agreement, UKCM shareholders will receive 0.4444 of a new Tritax share for every share they hold. Each UKCM share will be valued at 71.1p, based on Tritax’s closing share price as of February, 9. This is 10.8% higher than UKCM’s closing price as of February, 9.
Post-completion, shareholders of UKCM will hold around 23.3% of the issued ordinary share capital of the combined group, while existing BBOX shareholders will own approximately 76.7%.
Tritax Management will oversee the operations of the combined company once the deal is completed.
Deal Rationale
The boards of both companies believe that the deal is fair and the combined entity will have complementary portfolios. The merger is projected to yield cost savings of about £4.0 million annually, which will contribute to the growth of earnings and dividends.
Additionally, there is considerable potential for near-term rental growth, with a 39% rental reversion observed within UKCM’s logistics portfolio and a 24% rental reversion within UKCM’s overall portfolio.
What is the Forecast for Tritax Big Box?
On TipRanks, BBOX stock has been assigned a Strong Buy consensus rating based on three Buys and one Hold recommendation. The Tritax Big Box share price forecast is 161.67p, which is 5% above the current trading level.
