The £440 million Abrdn Property Income Trust (API) will be wound down after a proposed merger with rival fund Custodian Property Income REIT (CREI) failed to get sufficient support from shareholders.
Abrdn Property Income Trust said that while a majority of its shareholders voted to back the merger with CREI, the proposal failed to reach the 75% support threshold required.
Custodian Property Income REIT chairman David MacLellan said “shareholders accounting for just 14% of API’s register proved sufficient” to prevent the merger.
“The total votes in favour of the resolutions to implement the CREI merger were 60.79% of API shares voted at the Court Meeting and 61.37% of API shares voted at the General Meeting, and 86.15% by number of API shareholders who voted at the Court Meeting,” said Abrdn Property Income Trust.
“The proportions of API shares voting in favour were below the minimum threshold needed to approve the resolutions.
“As such the CREI merger has been terminated, the scheme of arrangement implementing the CREI merger has lapsed and API is no longer in an offer period as defined by the City Code on Takeovers and Mergers.
“Further to its announcements of 14 March 2024 and 20 March 2024, the API board will now take steps to implement a managed wind-down subject to the approval of API Shareholders at a general meeting.”
Abrdn Property Income Trust chair James Clifton-Brown said: “The API board independently elected to undertake a comprehensive review of API’s strategic options which resulted in a number of opportunities to deliver an uplift in value for API Shareholders.
“While the CREI Merger gained the support of 61% by value of API shareholders voting and approximately 79% by number, the former falls short of the 75% threshold required.
“In view of these results and the challenges that API would continue to experience as a standalone company, the API board will now take steps to implement a managed wind-down, subject to API shareholder approval, building upon the work already undertaken by the API board and the company’s investment manager and advisers, with the objective of delivering enhanced returns for API shareholders.”
Custodian Property Income REIT chairman David MacLellan said: “Our proposal was fully aligned with the existing investment strategies of both companies and structured on an NTA-to-NTA basis to ensure that the exchange ratio was based upon the latest respective underlying property valuations.
“Furthermore, it was unanimously recommended by the API Board and allowed both API and CREI shareholders to benefit from the long-term benefits of being invested in a combined business which brought together two highly complementary portfolios, with a growing and fully covered dividend.
“We are therefore disappointed that despite the majority of votes cast being in favour of the transaction at the API Meetings today, this was not enough to meet the 75% threshold required to approve the transaction.
“In fact, shareholders accounting for just 14% of API’s register proved sufficient to prevent the resolutions passing.
“These votes were, we understand, primarily from institutional investors who believe a ‘managed wind-down’ of API’s portfolio will better protect shareholder value, despite the API board clearly and publicly setting out the flaws in this conclusion.
“CREI wishes API and its shareholders every success in the future as API continues as an independent business.
“The CREI board believes it is important to note that it viewed the transaction as an augmentation of, rather than critical to, the strategy that CREI has pursued successfully over the 10 years since it launched in 2014.
“Instead of gaining a jump in scale via the recommended merger, CREI will maintain its strategy of incremental growth and, most importantly, continue to offer CREI shareholders an attractive dividend from a highly diversified portfolio, significant rental growth potential, low costs relative to its peers, as well as a strong balance sheet with a low cost of debt.
“We also maintain our conviction as to the merits of the company’s income-focused investment strategy with an emphasis on regional, below-institutional sized assets that are well-positioned to deliver rental growth.
“These types of assets provide a clear yield advantage over larger properties with similar tenant profiles and allow us to generate higher income returns and capital growth for CREI shareholders.
“In addition, the company remains committed to fully covered dividends which the CREI Board will seek to increase on a sustainable basis going forward.”