Warehouse Reit jilts private equity for a Tritax Big Box takeover

Times

a day ago

A London-listed warehouse owner has jilted Blackstone, the world's biggest private equity firm, in favour of a £485 million merger with a larger rival.
Warehouse Reit had agreed this month to sell itself to Blackstone for £470 million but confirmed on Wednesday morning that it was reneging on that deal to recommend shareholders vote instead to merge with Tritax Big Box Reit.
The move follows hot on the heels of Assura's decision on Tuesday to abandon its sale to KKR, another US private equity firm, and seek a merger with Primary Health Properties, one of its peers.
A tie-up between Warehouse Reit and Big Box would create a London-listed landlord with £7.4 billion of giant warehouses next to motorways, industrial estates and inner-city delivery depots and manufacturing hubs. With a combined stock market value in excess of £4 billion, it would be on the fringes of the FTSE 100.
A merger would deliver immediate cost savings of £5.5 million a year which, when coupled with 'sizeable near-term rent reversion' across the portfolio, would boost earnings.
'The strategic rationale for the [merger] is very clear and having engaged closely with the Big Box team, we are confident in their ability to deliver value from this combination and to generate enhanced earnings and dividends for both Big Box and Warehouse shareholders,' Neil Kirton, chairman of Warehouse Reit, said.
'Warehouse shareholders will further benefit from the increased liquidity that comes from being invested in a larger company, providing them with greater optionality over when to crystalise returns.'
Big Box's offer comprises £200 million in cash, £14 million to cover Warehouse Reit's next two quarterly dividends and the rest — roughly £270 million — in Big Box shares, which would give Warehouse Reit shareholders just shy of 7 per cent of the enlarged group.
That cash-and-shares offer works out to 114.2p for each Warehouse Reit share, compared with the 109p a share that Blackstone had tabled.
Warehouse Reit shares rose 6¼p, or 5.8 per cent, to 113p on Wednesday morning, while Big Box shares retreated 3½p, or 2.3 per cent, to 147p, reflecting the potential dilution from issuing new shares to fund the deal.
Warehouse Reit owns dozens of industrial estates from Aberdeen down to Wareham in Dorset. It collects about £45 million in rent from its portfolio, which was last valued at £810 million. Most of its tenants are household names: the NHS, Argos, John Lewis, DHL and Costa Coffee.
Tritax Big Box owns 100 or so buildings in England and Scotland, mostly huge metal sheds used as storage and distribution hubs by the likes of Amazon, Ocado and Morrisons. Its portfolio was last valued at £6.6 billion and generates £314 million a year in rental income.
Blackstone had initially tabled a 115p-a-share offer for Warehouse Reit but knocked that down amid a disagreement over how much a parcel of land near Crewe was worth.
As with Assura, shareholders had raised concerns that Warehouse Reit was selling out to private equity at the bottom of the commercial property market, with valuations starting to recover after a tough few years.
Reflecting the jump in interest rates since 2022, values of warehouses, as with all commercial properties, have fallen by about a fifth. That is despite rents remaining strong, underpinned by a shortage of supply and the post-pandemic popularity of online shopping and companies increasingly 'near-shoring' their stockpiles and manufacturing capabilities.
'It looks like the window for private equity to buy [listed property companies] on the cheap is closing,' one industry investor said.