Mapletree North Asia Commercial Trust

[weijian]

@ghchua,
Quarz Capital's argument reminds me of the previous classic Class95's "Hear Only the Good Stuff" commercial.
https://www.youtube.com/watch?v=RFcKLuR8G9A

It is no secret that a REIT that trades >NAV will continue to trade at >NAV - As it issues "expensive" new equity to buy up assets <NAV, this in turn boasts its own NAV after the trade is done. If no gross mistakes are made, this virtuous cycle will not end. Unfortunately, MNACT is on an anti-virtuous cycle of trading <NAV and not able to acquire assets using expensive equity. So in order to piggy back onto one, something's gonna give, like selling itself cheap(er).

Now that MNACT price has increased, while MCT's has reduced. Maybe a better option for MNACT OPMIs would be to sell out MNACT and then use the proceeds to buy into MCT? This will hedge against the failure of the deal now that Quarz Capital are in play.

@mslee888
The one benefiting absolutely from the deal, would be the broker on both sides of the deal. Since MNACT is on an anti-virtuous cycle, it limits their ability to increase their AUM (and hence mgt fees). What is better than allowing the weaker one to latch onto the stronger one and then the combined entity continuing to ride the virtuous cycle? The guys at Keppel have already shown how it is done with their recent data center-M1 combination.

That said, I would not rule out MCT holders eventually benefitting from the deal via acquiring "cheap" assets using "expensive" equity. A stake in Festive Walk could actually be buying a call option for a future HK recovery (from political turmoil and covid19)

[ghchua]

Now that MNACT price has increased, while MCT's has reduced. Maybe a better option for MNACT OPMIs would be to sell out MNACT and then use the proceeds to buy into MCT? This will hedge against the failure of the deal now that Quarz Capital are in play.

Quarz is for the merger. They are just trying to get a better deal from MCT. But their arguments as I have put out earlier, doesn't hold at all. Obviously, the market is not stupid. MNACT had been trading at below NAV because of the various issues that they had. If the deal is off, my guess is that MCT will actually go up while MNACT will come down.

So, either way, both need each other. MCT needs MNACT to scale up, while MNACT needs MCT for better stability of their portfolio.

[weijian]

Although the answers are very obvious and will be best left unanswered, but these are some good questions from SIAS.

Sias questions MCT-MNACT proposed merger

It is therefore querying whether MNACT and its unitholders would be better served if the manager forges ahead with its strategy and only consider a merger at an offer price above its NAV.

Sias is also seeking clarity on whether the manager of MNACT is actively seeking competing bids and whether it has signalled to the market that it is prepared to consider superior offers.

On the other hand, MCT was asked whether it might be overpaying for MNACT's portfolio since MNACT has openly stated that the market has historically valued its units at below net asset value (NAV).

https://www.businesstimes.com.sg/compani...sed-merger

SIAS questions:
https://sias.org.sg/latest-updates/press...ust-mnact/
https://sias.org.sg/latest-updates/press...trust-mct/

[weijian]

The manager pays up to have a better chance to scale its AUM in the future.

MCT, MNACT unitholders approve merger to create third largest Reit in Singapore

The approval of the merger from both sets of unitholders comes after the managers of the 2 Mapletree Reits in March offered MNACT unitholders the option to receive the entire scheme consideration of their proposed merger wholly in cash, at S$1.1949 per unit.

The cash-only consideration is the default form of the scheme consideration under the revised trust scheme.

To fund the additional cash requirement of up to S$2.2 billion from the cash-only option, MCT will make a preferential offering of up to 1.09 billion units at S$2.0039 each – which is the same as the scheme issue price of each consideration unit.

Mapletree Investments – a privately held unit of Temasek Holdings and the sponsor of both MCT and MNACT – has provided an undertaking to subscribe up to the full S$2.2 billion in the preferential offering at the issue price.

Under the original proposal of the trust scheme, MNACT unitholders would receive a scheme consideration of S$1.1949 for each MNACT unit held, either in the form of 0.5963 new MCT units at an issue price of S$2.0039 each, or a combination of 0.5009 consideration units and S$0.1912 in cash.

The cash-only option was seen as a way to appease disgruntled unitholders on both sides.

https://www.businesstimes.com.sg/compani...-singapore