Terms of Tritax Big Box and UK Commercial merger agreed

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The Boards of Tritax Big Box REIT (BBOX) and UK Commercial Property REIT (UKCM) have reached agreement on the terms of a recommended all-share merger.

Under the terms, each UKCM shareholder will be entitled to receive 0.444 new BBOX shares for each UKCM share.

The exchange ratio is on an EPRA NTA for EPRA NTA basis with reference to BBOX’s 31 December 2023 EPRA NTA of 177.2 pence per share and UKCM’s 31 December 2023 EPRA NTA of 78.7 pence per share.

Based on BBOX’s closing price of 160.2 pence on 9 February 2024 (being the day of the commencement of the offer period), the combination implies a value of 71.1 pence per UKCM Share and around £924m for the entire issued share capital of UKCM.

This represents:

  • a premium of 10.8% to the UKCM closing price of 64.2 pence on 9 February 2024;
  • a premium of 23.0% to the volume weighted average price of 57.8 pence for the six-month period ended 9 February 2024; and
  • a discount of 9.7% to UKCM’s 31 December 2023 NAV of 78.7 pence.

Strategic rationale

The boards of BBOX and UKCM said that they believe that the combination has a compelling strategic and financial rationale, which are set out below:

  • High-quality, complementary logistics-focused portfolios, offering significant and near-term rental growth potential with 39% rental reversion within UKCM’s £740m logistics portfolio and 24% rental reversion within UKCM’s overall portfolio;
  • Enhanced BBOX customer offering, via a broader range of logistics property sizes, locations and tenant uses from “Mega-Boxes” to smaller, strategically located, logistics assets within key urban locations;
  • Value creation from capital recycling, with UKCM’s £475m non-logistics assets offering attractive asset management and capital recycling opportunities which provides the potential for accelerated investment into BBOX’s development pipeline, targeting the delivery of new, “triple net” leased, best-in-class logistics assets at a 6% to 8% yield on cost (noting that a 7.0% yield on cost is being targeted for 2024 development activity);
  • Immediately identifiable costs savings, with the combination expected to generate immediately identifiable cost savings of c.£4.0m per annum, helping to drive earnings growth and dividend progression;
  • Robust and conservatively leveraged balance sheet, with a reduced loan-to-value ratio of 29% and net debt to EBITDA of 7.4x, significant available liquidity and no near-term debt maturities; and
  • Creation of the fourth largest UK REIT, with a combined EPRA NTA of approximately £4.4bn, benefitting from enhanced financial flexibility, expected cost of capital benefits, and increased share liquidity given its enlarged scale and index weightings.

Shareholder support

Both boards have recommended the merger and will vote their share holdings in favour. In addition, UKCM’s two largest shareholders Phoenix Life, which owns 43.4% of the company) and Investec Wealth & Investment (which owns 13.1%) have vowed to vote in favour of the combination.

In total, therefore, BBOX has received from UKCM shareholders (including the UKCM recommending directors) irrevocable undertakings and a letter of intent representing, in aggregate, approximately 56.5% of the issued ordinary share capital of UKCM.

The merger is expected to become effective in May 2024.


Aubrey Adams, chairman of BBOX said: “The Board of BBOX believes the Combination has compelling strategic and financial rationale for both BBOX and UKCM Shareholders. UKCM has assembled a high-quality logistics-oriented portfolio with a South-East and Midlands focus and significant embedded rental reversion potential, all characteristics which are complementary to BBOX’s current portfolio. The Combination grows BBOX’s exposure to “last mile” and urban logistics assets which have the potential to enhance returns of the existing portfolio. This Combination represents a continuation of the highly successful strategy that BBOX has delivered since IPO and which over recent years has included acquiring selected “last mile” and urban logistics assets.

“Shareholders in the Combined Group will benefit from immediately identifiable cost savings creating increased scope to deliver higher earnings and dividends, while capital recycling and asset management opportunities in the UKCM portfolio represent significant further opportunities to enhance total shareholder returns.”

Margaret Littlejohns, senior independent director of UKCM, added: “The UKCM Recommending Directors believe this transaction allows all UKCM shareholders to benefit from continued investment in a REIT, but with significantly larger scale and improved share liquidity, as well as addressing the factors we believe have contributed to the persistent discount at which UKCM’s shares have traded for many years. The combined business will be invested in a high-quality UK logistics portfolio, where BBOX has a strong track record of delivering attractive, sustainable returns which will drive improved earnings for UKCM shareholders and support a fully covered dividend. By combining the businesses on an EPRA NTA-to-EPRA NTA basis, shareholders will be able to share fully in the future potential valuation upside whether that is delivered from asset management initiatives, rental growth, the potential of the BBOX development pipeline or a broader improvement in real estate sector sentiment. These factors together with the compelling strategic and financial rationale of the transaction lead us to recommend this deal to all shareholders.”

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