When the managers of Mapletree Commercial Trust (MCT) and Mapletree North Asia Commercial Trust (MNACT) announced that they were providing MNACT unitholders with an alternative cash-only option pertaining to the proposed merger of both REITs, the managers had also released their responses to a list of frequently asked questions (FAQs) with regard to the new option.
See: MCT to give MNACT unitholders alternative option to receive $1.1949 in full cash per MNACT unit
According to both managers, the alternative cash-only option will provide higher certainty to MNACT unitholders, as well as give them greater flexibility for them to select the form of consideration that is best suited to their needs.
The cash-only option will also be the default form of the scheme consideration.
In the same statement, the managers assured MCT unitholders that their interests were also safeguarded as the inclusion of the cash-only option achieves the same pro forma financial effects as the existing options.
The merger continues to remain accretive to MCT unitholders’ distribution per unit (DPU) and net asset value (NAV) on a pro forma basis, say the managers.
See also: Changes in ICR, leverage to come into effect immediately, with additional disclosures in March
It adds that the introduction of the latest option will not increase any debt financing requirement. It will also have no effect on the aggregate leverage of MCT as well as the merged REIT, which is to be named Mapletree Pan Asia Commercial Trust (MPACT).
As to how the cash-only consideration came about, the REIT managers said that the request came from the manager of MNACT in light of the current market conditions and feedback from MNACT’s unitholders.
The request was accepted by the manager of MCT, who felt that the new option was “in the best interest of the merger” since it accorded more certainty to MNACT’s unitholders, without affecting the interests of MCT’s unitholders.
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Why $2.0039 per unit?
Introducing the new cash-only option means MCT would have to fork out a higher cash amount to fund the scheme consideration. According to the REIT managers, the additional cash will be raised via a pro-rata non-renounceable preferential offering of MCT units to MCT unitholders.
The manager of MCT has also sought the support of its sponsor, Mapletree Investments; the latter has agreed to subscribe for the maximum preferential offering units of up to $2.2 billion at an issue price of $2.0039 per MCT unit.
According to the manager of MCT, the issue price of $2.0039 “demonstrates [its] commitment to the original terms of the merger and trust scheme, which is based on the implied scheme consideration of $1.1949 per MNACT unit and the scheme issue price of $2.0039 per consideration unit”.
Following the preferential offering to finance the alternative cash-only option, MPACT’s free float will remain equivalent or greater than MCT’s current free float size of $4.5 billion as at Dec 27, 2021.
“Any potential uplift in the merged entity’s free float size on completion of the merger and the preferential offering will be determined by the results of the election of the form of the scheme consideration to be received by the MNACT unitholders, increasing with the election of the scrip-only consideration or the cash-and-scrip consideration as well as the pro-rata participation of MCT unitholders in the preferential offering,” say the REIT managers.
MCT is currently a constituent in key indices such as the FTSE EPRA Nareit Developed Index and Developed Asia Index, the MSCI Singapore Index and the Straits Times Index (STI).
MPACT, upon the completion of the merger, is expected to continue to be a constituent in the same indices.
Units in MCT and MNACT closed at $1.90 and $1.22 respectively on March 21.
