SEGRO and Tritax EuroBox (EBOX) have announced that their boards have reached agreement on the terms of a recommended all-share offer by SEGRO for EBOX, under which EBOX shareholders will receive 0.0765 new SEGRO shares per EBOX share.
Based on the closing price per SEGRO share of 880.0p as at 3 September 2024, the proposed transaction values each Tritax EuroBox Share at 68.4p, equivalent to 81.1 €cents at the current exchange rate. This represents:
- a premium of approximately 27% to the closing price per Tritax EuroBox share of 53.8 pence as at 31 May 2024, being the last business day prior to the commencement of the current offer period;
- a premium of approximately 27% to the volume-weighted average price per Tritax EuroBox share of 53.8 pence for the 3-month period prior to the 31 May 2024;
- a discount of approximately 14% to Tritax EuroBox’s last reported IFRS NAV and EPRA NDV per share of 93.9 €cents as at 31 March 2024; and
- an implied topped-up Net Initial Yield of 5.2%.
Transaction implies enterprise value for EBOX of £1,101m
The proposed transaction values EBOX’s issued share capital at approximately £552m (€654m at the current exchange rate) which, based on Tritax EuroBox’s net debt as at 31 March 2024, implies an enterprise value of approximately £1,101m (€1,306m). Assuming that the transaction proceeds, it is estimated that existing SEGRO shareholders will own approximately 96% of the combined company while existing Tritax EuroBox shareholders will own approximately 4%.
Dividends
Existing Tritax EuroBox shareholders will be entitled to receive and retain a dividend of 1.25 cents per share (1.05 pence per share) in respect of the quarter ending 30 September 2024.
Compelling opportunity for both sets of shareholders
The boards of Tritax EuroBox and SEGRO say they believe that the transaction is a compelling opportunity for shareholders in both companies, delivering a significant uplift in value for Tritax EuroBox shareholders and adding a portfolio of well-diversified and high-quality logistics assets to SEGRO’s portfolio on attractive terms.
EBOX has received interest from a number of parties
EBOX says that, since putting itself on the market on 3 June 2024, its board has received expressions of interest regarding a potential sale from a number of different parties and has reviewed and negotiated a range of proposals, including offers in shares or cash, or the acquisition of the company’s assets (in whole or in part) for cash. It has compared these proposals to one another and to Tritax EuroBox’s standalone prospects, as well as the strategic options considered by the board of Tritax EuroBox as part of a review in April 2024 (which included a potential managed wind-down and a significant share buyback programme funded by disposals) and concluded that the transaction with SEGRO represents a compelling opportunity for Tritax EuroBox shareholders to achieve a significant and immediate uplift in the value of their investment with the prospect of stronger total shareholder returns and optionality by virtue of enhanced liquidity. By exchanging their shares in Tritax EuroBox for shares in SEGRO, Tritax EuroBox shareholders would have the option either to:
- retain exposure to the European industrial and logistics sector, through holding shares in the largest and most liquid REIT in Europe, while benefiting from further upside potential from a recovery in market conditions, exposure to an active development programme and the value creation resulting from the transaction; or
- sell their new SEGRO shares for cash, taking advantage of SEGRO’s significantly greater liquidity, due to SEGRO’s £11.9 billion market capitalisation, 100 per cent. free float, primary listing on the London Stock Exchange with a secondary listing on Euronext Paris, and membership of the FTSE 100.
EBOX portfolio complements SEGRO’s European portfolio
SEGRO said that it believes that Tritax EuroBox’s assets, most of which are located in SEGRO’s existing core markets, will complement SEGRO’s Continental European big box portfolio (including those assets managed under the SELP joint venture) and strengthen this part of its business. The Tritax EuroBox portfolio has strong income and growth characteristics, which align well with SEGRO’s own investment objectives. In addition to the 5.2% implied topped-up Net Initial Yield at which SEGRO is acquiring the Tritax EuroBox assets, SEGRO expects to internalise the management of the portfolio through termination of the existing Investment Management Agreement with the manager, utilising its existing operating platform to manage Tritax EuroBox’s properties in its current geographies. It is also expected that there will be additional cost savings from the removal of other corporate expenditure associated with Tritax EuroBox currently being an independent listed entity.
SEGRO also expects to continue to benefit from a strong balance sheet. SEGRO has reached an agreement with the USPP noteholders to waive their change-of-control rights and roll the €200m USPP notes issued by Tritax EuroBox into SEGRO with SEGRO becoming a parent guarantor of such USPP notes. In addition, the €500m green bonds issued by Tritax EuroBox will roll into SEGRO on their existing terms. Based on the amended terms of the USPP Notes, SEGRO will assume Tritax EuroBox’s existing debt at an attractive weighted average cost of debt of 1.5% with a weighted average maturity of three years. Following the effective date, SEGRO expects no significant change to its leverage position, with pro forma LTV expected to continue to be approximately 30%.
SEGRO expects the transaction to be accretive to both EPRA NTA per share and adjusted earnings.
The deal is expected to become effective before the end of the calendar year.
Commenting on the transaction, David Sleath, chief executive of SEGRO, said: “This transaction offers the opportunity to acquire a high quality portfolio of big box warehouses in core European markets which would complement and enhance our existing assets. The management of the portfolio will be internalised on completion, taking advantage of economies of scale from our existing, locally-based operating platform.
“We intend to apply the long-established SEGRO strategy of disciplined capital allocation and operational excellence, based on an efficient and resilient corporate and capital structure and the Responsible SEGRO principles as we do for all assets we own and manage. While shareholders can expect this approach to lead to some capital recycling, we recognise the high quality of the portfolio assembled by the Manager and look forward to working with it for the benefit of our new and existing shareholders.”
Robert Orr, chair of Tritax EuroBox, added: “As set out at Tritax EuroBox’s half-year results in May this year, the Board has been focused on how best to deliver value for Tritax EuroBox shareholders in an effective and efficient manner. The Board would like to thank the Manager for the important role it has played in curating and managing Tritax EuroBox’s high-quality asset base, and actively managing the portfolio in order to achieve the best outcome for shareholders in the context of a difficult macroeconomic environment for the property sector.
“The transaction with SEGRO represents a compelling opportunity for Tritax EuroBox shareholders to achieve a significant and immediate uplift in the value of their investment and stronger total shareholder returns, with the option either to retain exposure to the European industrial and logistics sector through holding shares in the largest and most liquid REIT in Europe, or to sell their New SEGRO Shares for cash, taking advantage of SEGRO’s significantly greater trading liquidity. The Board is pleased to recommend the Transaction to Tritax EuroBox Shareholders.”
