- Shareholder vote imminent
- Merger the preferred outcome
- Wind-down problematic
The board of industrial property investment trust Abrdn Property Income (API) has reiterated its support for an all-share merger with rival Custodian Property Income REIT (CREI) as opposed to a managed wind-down.
Shareholders in Custodian have already voted through the merger with 98% in favour.
CALL TO ACTION
API shareholders voting by proxy need to make sure their forms are returned by no later than 10am on Monday 25 March ahead of the Court Meeting and General Meeting scheduled for the morning of Wednesday 27 March.
Given the decision by Urban Logistics REIT (SHED) to withdraw its lower bid for API, the alternative to a merger with Custodian is a managed wind-down of the portfolio which is commercially much less attractive and would take a considerable amount of time to execute.
As API chair James Clifton-Brown explained to Shares, having carried out wind-downs before, hoisting a For Sale sign over the portfolio would result in lower disposal values than if the company were to sell assets in the ordinary course of its business – in some cases quite a lot lower than might otherwise be expected – as well as incurring significant costs.
In contrast, merging with Custodian would bring benefits of scale, superior growth prospects, a premium to the API share price, an increased dividend – which is fully covered, unlike at present – together with an uplift in yield, increased liquidity in the shares and lower costs thanks to the increased asset base.
Investment trusts are increasingly being encouraged to merge by large investors such as wealth managers, who themselves are going through a consolidation phase and find themselves unable to invest in companies which are 'sub-scale'.
