Who will win the Abrdn property trust bidding war?

The bidding war over the Abrdn Property Income Trust has reached new heights as Custodian Property Income REIT and Urban Logistics REIT fight over which trust should get their hands on Abrdn’s portfolio.

Today, the Abrdn trust’s board confirmed its recommendation that its shareholders vote in favour of a takeover by Custodian while politely saying no thank you to Urban Logistics.

After assessing all the options, the Abrdn board decided that there was “a compelling strategic and financial rationale” for Custodian and that it will not recommend the Urban Logistics proposal to its shareholders.

Custodian, predictably, welcomed the news of the Abrdn endorsement and said the merger “will benefit shareholders of both companies by creating a well-positioned REIT of enhanced scale, with the opportunity to participate in the returns from the two complementary portfolios, as well as a fully covered and sustainable dividend”.

While the trust had initially recommended the merger with Custodian, a new offer came in soon after from Urban Logistics, leading the trust to re-evaluate.

Urban Logistics had not been deterred by the endorsement of the original offer, arguing that the Custodian REIT would be a ‘generalist’ strategy with a mix of asset classes (44 per cent warehouses, 20 per cent offices, 18 per cent retail parks and 18 per cent other assets).

In comparison, an Urban Logistics merger would see a portfolio that was over 90 per cent warehouses and retail parks, giving it a clear focus.

This split between diversification and specialisation has been the key divider here, and what each side is using to make their arguments.

Meanwhile, the actual price tag on each bid has also muddied the waters, as both offers are equity mergers, meaning the price being offered is constantly shifting.

While the Urban Logistics offer had originally been the better deal for shareholders, their share price has since dropped to the point where the Custodian offer is now more valuable.

Under the terms of the offer from Urban Logistics, Abrdn shareholders would receive 0.469 Urban Logistics shares for each Abrdn share they hold, or 55.6p at time of writing.

Meanwhile, Custodian’s offer would see shareholders receive 0.78 Custodian shares for each Abrdn share, or 58.9p at the time of writing.

In addition, Custodian’s manager tried to sweeten the deal further yesterday for Abrdn shareholders, saying it would waive a planned £350,000 one-time project fee for its work on the merger.