It's been an uninspired day so far for ASX shares and the S&P/ASX 200 Index (ASX: XJO). At present, the ASX 200 has gained an anaemic 0.032% and is hovering just above 7,500 points. But let's talk about two ASX real estate investment trusts (REITs) that are making news this Wednesday.
If you've got a keen interest in Wesfarmers Ltd (ASX: WES), you may be familiar with either the BWP Trust (ASX: BWP) or the Newmark Property REIT (ASX: NPR). Or perhaps both.
Both of these REITs lease land to Wesfarmers.
BWP owns a 73-property portfolio of real estate, with 61 of those properties occupied by Bunnings Warehouses.
Meanwhile, Newmark has a portfolio consisting of nine properties. These are rented out to retailers like JB Hi-Fi Ltd (ASX: JBH), Petstock and Freedom. But 74.1% of the ASX REIT's income comes from Wesfarmers businesses like Kmart, OfficeWorks and Bunnings.
Why is this significant? Well, the big ASX REIT news today is that these two property trusts are merging.
Image source: Getty Images
BWP and Newmark to join in an ASX Bunnings REIT mega-merger
In an announcement put out this morning, both REITs confirmed that Newmark was approached by BWP for a full takeover last month.
Today, those details have become public, along with the news that Newmark's independent board committee has unanimously recommended that unitholders accept the latest offer.
That offer is an all-scrip one, with Newmark unitholders to receive 0.4 BWP units for every Newmark unit owned. That implies a valuation of $1.39 per Newmark unit. This, Newmark told investors, represents a whopping 43.1% premium to the 97 cents unit price Newmark units closed at yesterday.
As such, it's no surprise to see Newmark units pop on the share market this Wednesday. At present, the ASX REIT is up a massive 38.66% at $1.34 a unit.
In contrast, the BWP unit price has fallen 1.3% today to $3.42 so far.
Here's some of what Newmark chair Michael Doble told investors this morning:
The Proposal represents a highly attractive offer for NPR securityholders. The consideration reflects a material premium to NPR's trading price and provides an opportunity to participate in a larger merged group with lower gearing, which is particularly compelling given the ongoing elevated interest rate environment and market uncertainty.
After careful consideration, the IBC has concluded that the Proposal is in the best interests of NPR securityholders and unanimously recommends that NPR securityholders accept the BWP takeover offer, in the absence of a superior proposal.
The offer is conditional on 50.1% of Newmark unitholders granting approval for the merger, amongst other conditions. Both ASX REITs have put a 'mid-March 2024' deadline for the offer to close and the merger to proceed.
It's clear who investors think is betting the better deal here, judging by today's REIT unit price movements on the ASX.
