The board at Urban Logistics REIT has started discussions with LondonMetric about a possible £674 million takeover after receiving an indicative proposal from the latter, which they would be minded to recommend.
Urban Logistics REIT confirmed in a statement on 14 April that it had received the approach from LondonMetric consisting of "new shares in LondonMetric based on an adjusted EPRA net tangible assets for adjusted EPRA NTA exchange ratio plus a fixed amount in cash".
Under the terms of the latest proposal, shareholders in Urban Logistics would be entitled to receive 0.5612 new LondonMetric shares for each Urban Logistics REIT share and 42.8 pence in cash. They would also be entitled to retain the dividend for the second half of the financial year ending 31 March 2025. This is expected to be 4.35 pence per Urban Logistics share and to be paid in July 2025.
Based on LondonMetric’s closing share price of 182.1 pence on 11 April 2025, the last business day before the announcement, the LondonMetric proposal values each Urban Logistics share at 145 pence and Urban Logistics’ entire issued and to be issued share capital at approximately £674 million.
Urban Logistics shareholders would hold approximately 11.3% of the combined group’s issued share capital following completion of the possible offer.
The board of Urban Logistics REIT said in a statement: "In arriving at its decision, the Board has considered the advantages of the LondonMetric Proposal for Urban Logistics shareholders, including an attractive uplift in value, with approximately 30% de-risked via the cash consideration, and meaningful accretion in earnings and dividends per share in respect of the share consideration.
"Urban Logistics shareholders would have continued participation in the logistics sector, which would represent 54% of the combined group’s £7.3 billion portfolio, with increased scale and diversification as well as greater cost efficiency under LondonMetric’s internal management team.
"Urban Logistics shareholders would also benefit from increased liquidity through holding shares in a FTSE 100 constituent, and cost of capital benefits through the combined group’s superior access to financing and LondonMetric’s investment grade credit rating."
The board also confirmed that it was allowing LondonMetric to undertake a period of confirmatory due diligence, but stressed there was "no certainty that any offer for Urban Logistics will be made". Its intention to recommend the takeover comes after the last-mile industrial specialist announced at the end of last week that it had received a preliminary takeover bid from LondonMetric, read here.
Urban Logistics REIT has built a last-mile logistics real estate portfolio with a gross asset value as at 30 September 2024 of £1.1 billion and with significant reversionary potential. The company is the only London-listed REIT to focus on specialist last-mile logistics assets. Its strategy is to invest in mid-sized logistics properties and tenants include Amazon, XPO, DHL, Hermes, DPD, Boots, Unipart, Royal Mail and Sainsbury's.
Last year, the company begun a "selective recycling programme" in an effort to generate more capital to spend on higher yielding opportunities, according to its chief executive, as it looked to rebalance its portfolio towards active asset management, as reported.
In March, it said talks with its shareholders about a move to an internalised management structure as well as a number of asset management priorities were proceeding well. It also responded to speculation on corporate activity and said the board was "not in receipt of an approach by or on behalf of a potential offeror for Urban Logistics" at that time.
LondonMetric Property, the REIT that focuses on logistics warehouses and retail and leisure parks, is now the UK's fourth largest REIT, in part thanks to buying listed peers, the largest being its acquisition of LXi REIT last year. It has a market capitalisation of £3.71 billion and a circa £6 billion portfolio.
In November it reported "dramatic" earnings growth with its chief executive Andrew Jones saying it continued to "put the rods out where the fish are swimming" as the firm worked towards logistics comprising 50% of its portfolio by financial year-end, from its current 45%.