LondonMetric is to acquire LXi in a £1.9bn all-share merger that will create the UK’s fourth largest real estate investment trust (REIT).
Under the terms of the merger, shareholders of LXi will receive 0.55 new LondonMetric shares for each LXi share held. The deal values LXi at £1.9bn and represents a premium of approximately 9% to the last closing price of LXi.
The deal will create a £4.1bn listed giant in the UK property sector.
The offer implies a discount of 4% to the net tangible asset value of both LondonMetric and LXi.
Following completion, existing Londonmetric shareholders will hold approximately 54% of the combined group, and LXi shareholders will hold approximately 46%.
In a statement to the London Stock Exchange, the companies said the merger would result in “the establishment of a UK-focused triple-net-lease REIT of scale, with a highly efficient structure delivering reliable, repetitive and growing income through the cycle”. The pair will have a combined portfolio worth £6.2bn.
Andrew Jones, chief executive of LondonMetric, said: “This is a compelling transaction which creates the UK’s leading triple-net-lease REIT and underscores our ambitions to leverage our management platform and access exciting new opportunities across the UK real estate market.
“The combined £6.2bn portfolio will have no legacy assets, full occupancy, high occupier contentment and exceptional income longevity with a high certainty of growth – both organically and contractually.
“In the world of income compounding, bigger is better and the deal will deliver economies of scale, substantial cost savings, better liquidity and improved terms in both debt and equity markets which will drive accelerated earnings and dividend progression.”
Cyrus Ardalan, chairman of LXi, said: “LXi has delivered strong growth and outperformance since its IPO in 2017 thanks to its high quality, resilient and actively managed long-income portfolio. The merger with LondonMetric will build on the strengths and track records of both LXi and LondonMetric.”
Ardalan added that the combined group will have “an enlarged and more diversified portfolio aligned to structurally supported sectors, a robust and predominantly unsecured capital structure, broader appeal to investors and enhanced share liquidity, and a highly regarded internal management team”.
Following completion of the merger, it is expected that Nick Leslau will join the LondonMetric board as a non-executive director.
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