04 September 2024
If you are covering the news that Segro has announced an offer to acquire Tritax Eurobox, please see a comment below from Oli Creasey, property analyst at Quilter Cheviot:
“Segro, the FTSE 100 listed REIT, which owns industrial and warehousing property throughout the UK and Europe, has this morning announced an all-share offer for Tritax Eurobox, a c.£500m market cap owner of European logistics assets.
“This is the latest chapter in the Eurobox story, which started earlier this year when the company received an approach from Brookfield, a large Canadian property asset manager. Brookfield has not at present made a firm offer, but the deadline for such an offer has been extended and now runs until the 23rd September. However, Eurobox did also receive a number of other offers, and it appears that it is not waiting to hear back from Brookfield and has recommended its shareholders accept the all-share offer from Segro.
“The offer is for 0.0765 Segro shares per Eurobox share and represents a 27% premium to the prior Eurobox share price prior to the first approach from Brookfield. However, the M&A speculation since then has pushed Eurobox’s share price up to 67p, which is almost exactly what Segro have offered this morning, based on Segro’s 880p share price at yesterday’s close.
“The deal makes sense for Segro, whose shares are trading close to NAV, with the offer representing a 14% discount to Eurobox’s NAV (published March 2024). It is unlikely that Segro would be able to buy equivalent assets as cheaply in the direct property market. However, while the £500m Eurobox is small compared to Segro’s £12bn market cap, there is a degree of transactional risk. Notably, Eurobox has an LTV of 46%, compared to Segro’s 32%, and will result in a slight deterioration in debt metrics. That said, we think it’s manageable for a company of Segro’s size and experience and also note that the inherited debt costs only 1.4% with three years left on average – cheaper than any new debt that could be issued today.
“The pricing of the deal looks sensible, and Segro deserves recognition for not over-paying. However, it remains to be seen whether Eurobox shareholders will accept an offer at the current share price, especially since bid speculation has already led to a 24% increase in returns over the past 3-4 months. Additionally, Brookfield is still in the running with a likely all-cash bid. Although the board has recommended the offer, this alone may not suffice.”
