Update: AEW UK REIT (AEWU) has withdrawn its all-share offer for Alternative Income REIT (AIRE) citing the opposition of Glenstone REIT, AIRE’s 25.4% shareholder and rival bidder, with the board of the target lashing out at its largest investor.
“Following Glenstone’s public statement that it would not support an offer from AEWU and subsequent attempts to engage with Glenstone to discuss the merits of AEWU’s proposals, notwithstanding the indicated support from the board of AIRE, AEWU confirms that it does not intend to make a firm offer for AIRE,” AEWU said ahead of a Friday deadline to finalise its intentions for the £103m long lease portfolio.
However, it reserved the right to return with an offer if Glenstone withdrew, if another bidder emerged or if the Takeover Panel decided there had been a “material change in circumstances”.
A disappointed AIRE again urged its shareholders not to accept Glenstone’s “opportunistic” £56m cash offer by its deadline of 4 September, saying it was 16% below net asset value (NAV) of 83.3p per share.
“Glenstone’s announcement does not explain why AIRE shareholders should transfer control of the company and its assets to Glenstone at such a material discount,” said AIRE.
It rejected Glenstone’s questioning its dividend prospects and its “inference” there was something wrong with AEWU.
“Glenstone seeks to portray the fact that AIRE has not published a new dividend target for the current financial year as evidence of an uncertain future. As Glenstone well knows, including through Adam Smith, a director and major shareholder of Glenstone who served on the AIRE Board for over five years until his resignation on 6 July 2026, the AIRE board has historically announced its dividend target for the financial year at the same time as the declaration of the first interim dividend, typically in November each year.
“The board sees no reason to depart from this established approach and Glenstone’s suggestion that the absence of a new dividend target at this stage creates uncertainty is therefore misplaced.”
It said Glenstone’s remarks last week on the administration of AIRE’s tenant Meridian Steel had omitted important information and its “description of possible vacancies as indicative of wider portfolio concerns is not supported by the facts already made available to AIRE shareholders”. It reiterated its 10 August update showing the portfolio remained fully let; with rent collection remaining at 100%.
AIRE’s statement, released at 7am at the same time as AEWU’s announcement, did not acknowledge the latter’s withdrawal and referred to the possibility that it could firm up its offer this week. It said AIRE shareholders did not have to do anything and that they would need to be consulted on Glenstone’s wish for a managed wind-down of the company as it has proposed.
“Glenstone’s attempt to create urgency ahead of that [AEWU] announcement does not improve the financial terms of the Glenstone offer or remedy its fundamental shortcomings,” it said.
AEWU added: “The possible offer, had it been implemented, could have led to the combination of two REITs with aligned portfolios, offering greater portfolio diversification, the benefits of increased scale, a reduction in operating costs and an attractive ongoing dividend per share, with AEWU currently paying an annual dividend of 8 pence. The possible offer would have been expected to be earnings accretive for AEWU, had it been implemented.”
AEWU has a market capitalisation of £168m and AIRE is valued at £56m.
The statement was accompanied by an update showing AEWU’s NAV fell 0.5% in the second quarter to 107.8p per share at 30 June, down from 108.38p at 31 March. Fund manager Laura Elkin said there had been several lettings during the quarter at Bristol, Runcorn and St Helens to lift future earnings.
AIRE shares fell 1.2p to 69p, a 17.5% discount to their NAV of 83.6p at 30 June. AEWU shed 0.5% to 106.3p in line with the NAV announcement.
Our view
Matthew Read, senior analyst at QuotedData, said: “This is a disappointing outcome for AIRE shareholders. There was a clear strategic logic to combining AEWU and AIRE – the portfolios are complementary, there were potential cost and scale benefits and the deal was expected to enhance AEWU’s earnings – but Glenstone’s 25.4% stake gives it considerable influence over the outcome and, with it firmly opposed to AEWU’s proposal while pursuing its own cash offer, continuing the process would risk wasting time and shareholders’ money. Returning to Glenstone’s offer, we still think this comes at too wide a discount and that AIRE shareholders would be better served by the REIT forging ahead on its own.
“Despite the small drop in NAV during the quarter, there is still plenty to like at AEWU: another quarter of underlying valuation growth, improving earnings and evidence that the manager’s hands-on approach continues to add value. The 48% rental uplift at St Helens and the two Runcorn lettings at rents around 42% above previous levels are the sort of transactions that should feed through into stronger income and dividend cover. The 8p annual dividend is not quite fully covered yet, but earnings per share has moved in the right direction to 1.89p for the quarter and the balance sheet remains conservatively geared.”
