Shares in Custodian Property Income REIT PLC on Thursday jumped after a planned all-share merger with abrdn Property Income Trust Ltd was thwarted.

Shares in CREI soared 11% to 83.45 pence in London on Thursday morning. In contrast, shares in API fell 4.6% to 51.70p.

After the market close on Wednesday, API disclosed shareholders had failed to back the proposed merger with CREI in sufficient numbers.

API said the total votes in favour of implementing the merger were 61% of API shares voted at the court meeting, 61% of API shares voted at the general meeting, and 86% by number of API shareholders who voted at the court meeting.

This fell short of the 75% threshold required by value of API shares at both the court meeting and general meeting, and a majority in number of API shareholders voting at the court meeting, API said.

As a result, API intends to implement a managed wind-down as previously announced.

Custodian and abrdn are real estate investment trusts with a portfolio of properties in the UK.

In January, the pair agreed terms for an all-share merger, which would create a real estate investment trust with combined assets totalling £1.0 billion.

Per the agreement, abrdn Property Income shareholders would have received 0.78 new Custodian shares for each share in the company.

CREI Chair David MacLellan said he was ‘disappointed’ with the vote believing the deal to be ‘fair’ for all shareholders.

He said ‘shareholders accounting for just 14% of API’s register proved sufficient to prevent the resolutions passing.’

‘These votes were, we understand, primarily from institutional investors who believe a ’managed wind-down’ of API’s portfolio will better protect shareholder value, despite the API Board clearly and publicly setting out the flaws in this conclusion. CREI wishes API and its shareholders every success in the future as API continues as an independent business.’

MacLellan said it was important to note that CREI viewed the transaction ‘as an augmentation of, rather than critical to,’ its strategy.

‘CREI will maintain its strategy of incremental growth and, most importantly, continue to offer CREI shareholders an attractive dividend from a highly diversified portfolio, significant rental growth potential, low costs relative to its peers, as well as a strong balance sheet with a low cost of debt,’ he added.

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