Frasers’ Singapore REITs Agree to Merge in $1.1 Billion Deal

(Bloomberg) -- Frasers Logistics & Industrial Trust has agreed to buy Frasers Commercial Trust in a S$1.5 billion ($1.1 billion) deal, giving it greater ammunition to make acquisitions amid a spate of consolidation among Singapore's real estate investment trusts.

Combined, the group will have about S$5.7 billion of assets, propelling it into the city-state's top 10 REITs, according to a statement Monday. With about 100 properties across Singapore, Australia and Europe, including warehouses, offices and business parks, the merged firm's market value will almost double to about S$4.2 billion.

Under the merger, Frasers Logistics will acquire all of Frasers Commercial's shares through a combination of cash and shares.

The merger is at the least the fourth tie-up among Singapore-listed REITs this year. Benefits include the ability to consolidate management expertise and build a bigger war chest for acquisitions.

A combined Frasers Logistics and Frasers Commercial would also likely have an improved cost of capital, enabling it to compete more effectively on a global stage, said CGS-CIMB Securities analyst Lock Mun Yee, who has a buy rating on both REITs.

The takeover action kicked off in January when CapitaLand Ltd. struck a S$6 billion deal with Temasek Holdings Pte to combine Ascendas Pte and Singbridge Pte. OUE Commercial REIT in April agreed to buy OUE Hospitality Trust. And in July, Ascott Residence Trust and Ascendas Hospitality Trust agreed to create the largest hospitality trust in the Asia-Pacific region, with S$7.6 billion of assets comprising serviced residences and hotels.

Activist investors are pushing for even more consolidation. Quarz Capital Management Ltd. last month released an open letter saying that Sabana Shari'ah Compliant Industrial REIT and ESR-REIT should merge to solve the issue of overlapping investment mandates between the two trusts.

Frasers Property Ltd., backed by Thailand's TCC Assets Ltd., is the main sponsor for both REITs. TCC Assets is part of TCC Group, one of Thailand's biggest conglomerates, which was founded by the country's richest man Charoen Sirivadhanabhakdi.

The deal will allow the enlarged firm to expand its holdings of logistics and industrial properties, including in its existing markets of Germany, the Netherlands and Australia.

“What I would like to emphasize is that industrial remains very much an important market,” Frasers Logistics Chief Executive Officer Robert Wallace said at a media briefing. “We know that market well, we perform well in it.”

Logistics and industrial property will comprise about 60% of the combined firm's portfolio, followed by commercial, office space and business parks.

Both companies were halted from trading last week pending the announcement. Frasers Commercial Trust's securities were at S$1.67, having risen 22% this year, while Frasers Logistics units were at S$1.24, up 20% this year.

To contact the reporter on this story: Faris Mokhtar in Singapore at fmokhtar1@bloomberg.net

To contact the editors responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net, Peter Vercoe

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