- Combined portfolio valued at £6.4 billion
- Merged group would be worth £3.9 billion
- Promotion to the FTSE 100 could follow
In a sign consolidation in the UK real estate market is far from over, LondonMetric Property (LMP) and LXI REIT (LXI) have confirmed market rumours they are in talks over a possible all-share merger.
Shares in potential acquirer LondonMetric traded sideways at 197p, giving it a market value of £2.1 billion, while LXI shares gained 4.5p or 4.5% to 104p, valuing the company at more than £1.75 billion.
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THE URGE TO MERGE
Both firms are themselves the product of recent mergers, with LondonMetric having taken over CT Property Trust this summer and Mucklow in mid-2019 while LXI recently merged with Secure Income REIT.
The firms said they saw ‘potential to bring together two companies with complementary strategic approaches and a key focus on delivering compounding income-led total shareholder returns through the cycle’.
The merged company would have a proforma gross asset value of around £6.4 billion, and being internally-managed could deliver significant economies of scale and operating efficiencies leading to stronger earnings and dividend growth.
By sector, the portfolio would have large weightings towards logistics, healthcare, convenience, entertainment and leisure, with LXI bringing trophy assets such as Alton Towers and Thorpe Park to the mix.
HITTING THE BIG TIME
Putting the two companies together would create a group with a market value of £3.9 billion, which is well as providing improved share liquidity and better access to capital could see it join the FTSE 100 next year.
At present there are five stocks in the premier index with a smaller market cap than £3.9 billion – Beazley (BEZ), DS Smith (SMDS), Hikma Pharmaceuticals (HIK), RS Group (RS1) and St James Place (STJ) – although their places look safe for now as a merger between LondonMetric and LXI would inevitably take time to go through.
