Stifel remained cautious about the prospects of Tritax Big Box REIT PLC (LSE:BBOX)’s £924m all-paper deal for UK Commercial Property REIT (LSE:UKCM) (UKCM) announced this Monday.
The prospective NAV-for-NAV merger, which values UKCM at a 10.7% premium to last Friday’s closing price, would create the fourth-largest REIT in the UK with a £3.9 billion market capitalisation.
Stifel views the broader narrative of REIT growth through mergers within the listed space as a positive trajectory.
Nonetheless, the success of such consolidations hinges on clear strategic synergies and the adept management of non-core assets.
“It may well be that 60% of the portfolio is logistics, but 40% comprises a diverse selection of other assets which would be non-core to Tritax. This will all have to be dealt with,” noted Stifel.
“Following the announcement of the LMP and Lxi merger, the bar has now been set high,” Said analysts, referring to LondonMetric (LMP)’s potential all-share multibillion-pound buyout of rival LXi.
“Bigger is no doubt better, but is particularly appealing with a 7%-8% cost ratio and complementary portfolios,” analysts said of the Tritax-UKCM deal. “(Tritax) will have to demonstrate the rationale for the deal, beyond simply size matters.”
Until more concrete information on the offer emerges, Stifel maintains a hold rating on Tritax shares.