RECOMMENDED CASH AND SHARE ACQUISITION OF
URBAN LOGISTICS REIT PLC (“URBAN LOGISTICS”)
BY
LONDONMETRIC PROPERTY PLC (“LONDONMETRIC”)
to be effected by means of a scheme of arrangement
under Part 26 of the Companies Act 2006
Summary
The boards of directors of LondonMetric and Urban Logistics are pleased to announce that they have reached agreement on the terms of a recommended cash and share offer pursuant to which LondonMetric will acquire the entire issued and to be issued ordinary share capital of Urban Logistics (the “Acquisition” forming the “Combined Group“). It is intended that the Acquisition will be effected by means of a scheme of arrangement under Part 26 of the Companies Act.
Under the terms of the Acquisition, for each Urban Logistics Share held, the Scheme Shareholders will be entitled to receive:
0.5612 New LondonMetric Shares
and
42.8 pence in cash
On the basis of the Closing Price per LondonMetric Share of 191.5 pence as at the Latest Practicable Date, the Acquisition values each Urban Logistics share at 150.3 pence and the entire issued and to be issued ordinary share capital of Urban Logistics at approximately £698.9 million, and the terms of the Acquisition represent:
- a premium of approximately 21.8 per cent. to the Closing Price per Urban Logistics Share on the Undisturbed Date of 123.4 pence;
- a premium of approximately 27.2 per cent. to the three-month volume weighted average price per Urban Logistics Share on the Undisturbed Date of 118.1 pence;
- a premium of approximately 31.5 per cent. to the six-month volume weighted average price per Urban Logistics Share on the Undisturbed Date of 114.3 pence; and
- an implied EPRA NTA discount of approximately 3 per cent. based on each of LondonMetric’s and Urban Logistics’ EPRA NTAs per share as at 30 September 2024.
In addition, Urban Logistics Shareholders will be entitled to receive and retain an Urban Logistics’ interim dividend in respect of the second half of the financial year ended 31 March 2025, currently expected to be 4.35 pence per share, which is expected to be declared on or around the date of the publication of the Scheme Document and paid to Urban Logistics Shareholders on Urban Logistics’ register of members on a record date set prior to the expected Scheme Record Time.
Following completion of the Acquisition, existing LondonMetric Shareholders will hold approximately 89 per cent. and Urban Logistics Shareholders will hold approximately 11 per cent. of the enlarged issued share capital of LondonMetric.
Highlights of the Acquisition
LondonMetric’s objective is to own and manage desirable triple net real estate that meets occupiers’ demands, delivers reliable, repetitive and growing income-led returns and outperforms over the long term.
Since 2019, LondonMetric has pursued a strategy of acquisitive growth and has been an active consolidator in the UK listed real estate market, having completed the acquisitions of A&J Mucklow plc in 2019, CT Property Trust Limited in 2023 and LXi REIT plc in 2024, while currently progressing a recommended all-share acquisition of Highcroft Investments PLC which is expected to complete on 21 May 2025. LondonMetric is continuously assessing similar potential opportunities and has a management team with deep experience in both executing such transactions and integrating acquired businesses and portfolios.
The boards of Urban Logistics and LondonMetric believe that the Acquisition has a compelling strategic and financial rationale for Urban Logistics and LondonMetric Shareholders. In particular, the Acquisition would result in:
- a Combined Group which will benefit from further scale with a pro forma market capitalisation of £4.4 billion, making LondonMetric one of the largest UK REITs by market capitalisation and consolidating its position as the UK’s leading triple net lease REIT and a FTSE 100 company, providing enhanced access to capital and increasing share liquidity;
- a £7.3 billion portfolio aligned to winning macro thematics with the Combined Group exposed to desirable real estate in the structurally supported sectors of logistics, convenience, healthcare, entertainment and leisure;
- a leading logistics platform with a highly complementary portfolio with a value of £4.0 billion representing 54.5 per cent. of the Combined Group’s portfolio on a pro forma basis, of which £2.9 billion, or 40.3 per cent., is in higher growth urban logistics assets;
- an enhanced competitive position for pursuing opportunities of scale and competing with large private equity investors on substantial transactions;
- strong income characteristics with the Combined Group benefiting from an increased granularity of income, a sector-leading WAULT of 17 years, 97 per cent. occupancy and a 98 per cent. gross to net income ratio, supported by high quality occupier covenants;
- synergies and an improved cost structure further enhancing LondonMetric’s sector-leading EPRA cost ratio and superior EPRA earnings growth which underpins a fully covered, progressive dividend policy, with LondonMetric currently in its tenth consecutive year of dividend progression; †
- a highly attractive dividend uplift for Urban Logistics Shareholders equivalent to 24 per cent. based on LondonMetric’s FY25 target dividend of 12.0 pence per share and the Urban Logistics’ expected FY25 dividend of 7.6 pence per share, driven by LondonMetric’s very efficient triple net lease REIT platform; ‡
- driving earnings accretion anticipated in the next 2 years for the Combined Group delivered by capturing external and internal opportunities, including recycling assets, accessing larger development fundings, capturing embedded rental reversion and delivering economies of scale with greater cost efficiency; ‡
- the Combined Group retaining a resilient and conservative capital structure with pro forma LTV of approximately 36 per cent., a weighted average cost of debt of 4.0 per cent., a weighted average debt maturity of 4.8 years and £624 million of undrawn debt facilities;
- robust credit characteristics with the Combined Group benefiting from better and cheaper access to financing, which is improved by LondonMetric’s investment grade rating (Fitch: BBB+); and
- shareholders in the Combined Group benefitting from LondonMetric’s leading internal management platform, drawing on the strengths of the respective teams under the leadership of LondonMetric’s experienced board and highly regarded senior management team with deep market knowledge, strong investor and occupier relationships and strong shareholder alignment.
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† The statement regarding synergies is not intended as a quantified financial benefit statement and should not be construed as such and is not subject to the requirements of Rule 28 of the Takeover Code. The statement should not be interpreted to mean that operational synergies will necessarily result in a quantifiable benefit to the Combined Group.
‡ The statements regarding dividend targets, dividend uplift and the Acquisition driving earnings accretion are not intended as a profit forecast and should not be construed as such, and are not subject to the requirements of Rule 28 of the Takeover Code. The statements should not be interpreted to mean that the earnings per share in any future fiscal period will necessarily match or be greater than those for the relevant preceding financial period.
Recommendations
The Urban Logistics Directors, who have been so advised by Lazard and Kinmont as to the financial terms of the Acquisition, unanimously consider the terms of the Acquisition to be fair and reasonable. In providing their advice to the Urban Logistics Directors, Lazard and Kinmont have each taken into account the commercial assessments of the Urban Logistics Directors. Lazard and Kinmont are providing independent financial advice to the Urban Logistics Directors for the purpose of Rule 3 of the Takeover Code.
Accordingly, the Urban Logistics Directors intend to recommend unanimously that Urban Logistics Shareholders vote in favour of the Scheme at the Court Meeting and vote in favour of the Urban Logistics Resolution to be proposed at the General Meeting (or, in the event that the Acquisition is implemented by way of a Takeover Offer, to accept or procure acceptance of the Takeover Offer) as the Urban Logistics Directors who hold Urban Logistics Shares have irrevocably undertaken to do in respect of their, and their connected persons’, beneficial holdings of, in aggregate, 2,332,539 Urban Logistics Shares representing, in aggregate, approximately 0.50 per cent. of the issued ordinary share capital of Urban Logistics as at the Latest Practicable Date.
Shareholder Irrevocables
In addition to the irrevocable undertakings received from the Urban Logistics Directors, LondonMetric has received irrevocable undertakings to vote in favour of the Scheme at the Court Meeting, and in favour of the Resolution to be proposed at the General Meeting (or, in the event that the Acquisition is implemented by way of a Takeover Offer, to accept or procure acceptance of the Takeover Offer), from Achilles Investment Company Limited, North Atlantic Smaller Companies Investment Trust PLC and TR Property Investment Trust Plc in respect of a total of 26,633,283 Urban Logistics Shares, representing, in aggregate, approximately 5.73 per cent. of the issued ordinary share capital of Urban Logistics as at the Latest Practicable Date.
LondonMetric has also received irrevocable undertakings to vote or procure to vote in favour of the Scheme at the Court Meeting and the Resolution to be proposed at the General Meeting (or, if the Acquisition is implemented by way of a Takeover Offer, to accept or procure acceptance of the Takeover Offer) from the principals of the Investment Adviser in respect of 674,290 Urban Logistics Shares, representing, in aggregate, approximately 0.14 per cent. of the ordinary share capital of Urban Logistics in issue as at the Latest Practicable Date (in each case without counting any Urban Logistics Shares held by any principal of the Investment Adviser who is an Urban Logistics Director or any person connected to them).
In total, therefore, LondonMetric has received irrevocable undertakings representing, in aggregate, approximately 6.37 per cent. of the issued ordinary share capital of Urban Logistics as at the Latest Practicable Date.
Further details of these irrevocable undertakings are set out in Appendix 3 to this Announcement.
Timetable and conditions
It is intended that the Acquisition will be implemented by way of a scheme of arrangement under Part 26 of the Companies Act. However, subject to the Panel’s consent, LondonMetric reserves the right to elect to implement the Acquisition by way of a Takeover Offer.
The Acquisition will be proposed to Urban Logistics Shareholders at the Court Meeting and at the General Meeting. In order to become Effective, the Scheme must be approved by a majority in number of Scheme Shareholders present and voting at the Court Meeting, either in person or by proxy, representing at least 75 per cent. in value of the Scheme Shares voted by Scheme Shareholders at the Court Meeting. In addition, the Resolution must be passed by Urban Logistics Shareholders representing at least 75 per cent. of the votes validly cast on that resolution at the General Meeting, whether in person or by proxy. The General Meeting will be held immediately after the Court Meeting.
The Acquisition will be implemented in accordance with the Takeover Code and on the terms and subject to the Conditions which are set out in Appendix 1 to this Announcement and on the further terms and conditions that will be set out in the Scheme Document.
It is expected that the Scheme Document, containing further information about the Acquisition and notices of the Court Meeting and the General Meeting, together with the Forms of Proxy, will be published on or around 23 May 2025 and, in any event, within 28 days of this Announcement (unless Urban Logistics and LondonMetric otherwise agree, and the Panel consents, to a later date). It is expected that the Scheme will become Effective by 30 June 2025, subject to the satisfaction or waiver (as applicable) of the Conditions and the further terms set out in Appendix 1 to this Announcement and to the full terms and conditions of the Acquisition which will be set out in the Scheme Document. A timetable of principal events will be included in the Scheme Document.
Commenting on the Acquisition, Andrew Jones, Chief Executive of LondonMetric, said:
“This is an excellent transaction that grows our urban logistics platform and supports our triple net strategy. Urban warehousing remains our strongest conviction call for organic rental growth across the UK real estate market. The portfolio is well located, highly reversionary and our asset management focus will ensure that it delivers reliable, repetitive and growing income-led returns.
“We have a demonstrable track record of successfully executing on M&A and we expect the transaction will deliver substantial synergies, cost savings and accelerated earnings growth. Our scale will continue to deliver enhanced access to capital, more debt optionality, increased share liquidity and larger investment opportunities.”
Commenting on the Acquisition, Nigel Rich, Independent Non-Executive Chairman of Urban Logistics, said:
“Since its IPO in 2016, Urban Logistics has assembled an exceptional portfolio of single-let, ‘last mile’ assets and has outperformed the UK REIT sector and other relevant benchmarks. I would like to congratulate Richard Moffitt and the rest of the management team on this achievement and to thank them for their commitment and dedication.
The Board of Urban Logistics believes that the Acquisition offers Urban Logistics shareholders a premium price for their shares, an attractive combination of cash and share consideration and ongoing exposure to the logistics sector via a company of greater scale and liquidity.”