Merger would create a £6 billion logistics-oriented company / Image source: Adobe
  • All-share deal to create top four REIT
  • Offer at a 10.8% premium to closing price
  • Strong strategic rationale for combining

The wave of consolidation in the UK listed property sector looks set to continue with today’s announcement of an proposed deal between Tritax Big Box (BBOX) and UK Commercial Property (UKCM) to create the fourth-largest REIT (real estate investment trust) by market value.

Shares in UKCM gained 4.4% to a new 12-month high of 67p while Tritax Big Box shares eased 2.8% to 156p.


Tritax Big Box, which owns the UK’s largest portfolio of logistics assets such as distribution centres and warehouses, is offering to acquire UCKM in an all-share deal which values the latter at 71.1p per share or a 10.8% premium to its closing price last week but a 9.7% discount to its EPRA net tangible asset value of 78.7p per share as of 31 December.

Both firms’ boards argue the deal has ‘compelling strategic and financial rationale’, bringing together two complementary logistics-oriented portfolios with a broad range of property sizes and tenant uses to create a £6.3 billion giant with nearly £300 million of annual rental income and significant rental reversion potential.

Aside from the inevitable cost savings from consolidating two portfolios under one manager, the all-share nature of the deal means the new firm’s gearing will be kept low, with a loan-to-value ratio of 29% and no significant short-term maturities.

Indeed, in conversation with Shares just last week, UKCM manager Will Fulton proudly highlighted the fact the company had sold almost £100 million of assets last year at a blended yield of 3.8% and repaid a similar amount of its RECF (revolving credit facility) costing 7.2%, significantly reducing its gearing and financial costs.

There seems little doubt the deal will go through, given Tritax has already received support from Phoenix Life and Investec Wealth & Management in respect of more than half of UKCM’s shares.

It is worth remembering that UKCM attempted to merge with smaller rival Picton (PCTN) last year but the deal failed due to lack of support from Phoenix Life.


‘This is the latest in a series of mergers within the investment trust property sector, against a backdrop of wide discounts in a difficult macroeconomic environment. As one of the largest funds in the peer group and with its shares trading at a tighter discount than many of its closest peers, UKCM was not the most obvious takeover candidate’, commented Winterflood’s investment trust specialist Emma Bird.

The fact the firm has seen two approaches ‘likely reflects the quality of UKCM’s property portfolio, as well as the strength of its balance sheet, with a low net LTV ratio of just 16% as at 31 December’, added Bird.

The team at Liberum viewed the merger as ‘making the combined entity more investible’ while improving the potential for capital recycling and helping drive Tritax’s development activities.

They also argue the market isn’t pricing in enough net tangible asset growth to come at Tritax in the next couple of years ‘considering the robust growth in ERVs and steady valuations’.

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Issue Date: 12 Feb 2024