CMT and CCT to seek respective unitholders’ approval of proposed merger at unitholder meetings on 29 September 2020
- Independent directors of both managers have recommended that their respective unitholders vote in favour of the proposed merger
- Manager of CMT has waived 100% of the acquisition fee on a one-off basis in recognition of unprecedented circumstances brought about by COVID-19
Singapore, 4 September 2020 – CapitaLand Mall Trust Management Limited (CMTML) and CapitaLand Commercial Trust Management Limited (CCTML), the respective managers of CapitaLand Mall Trust (CMT) and CapitaLand Commercial Trust (CCT), today issued notices of their respective unitholder meetings which will be held on Tuesday, 29 September 2020. The meetings aim to seek unitholders’ approval for the proposed merger of CMT and CCT (the Proposed Merger) to create a diversified commercial real estate investment trust (REIT) to be named “CapitaLand Integrated Commercial Trust” (CICT or the Merged Entity). CMT will hold its Extraordinary General Meeting (EGM) at 10.30 am, while CCT will convene its EGM and Trust Scheme Meeting at 2.00 pm and 2.30 pm1 respectively.
The Proposed Merger is proposed to be effected by way of a trust scheme of arrangement (Trust Scheme), with CMT acquiring all the issued and paid-up units in CCT (CCT Units) held by the unitholders of CCT in exchange for a combination of issued and paid-up units in CMT (CMT Units) and cash. As set out in the Joint Announcement by CMTML and CCTML on the Proposed Merger on 22 January 2020, the consideration for each CCT Unit under the Trust Scheme comprises 0.720 new CMT Units and S$0.2590 in cash.
Mr Tony Tan, CEO of CMTML, said: “The managers of CMT and CCT mooted the Proposed Merger in January 2020 as our proactive response to Singapore’s changing real estate landscape. The overarching trend towards mixed-use precincts and integrated developments emphasised in the URA Master Plan 2019 is now expected to accelerate post-COVID-19. The rationale of the Proposed Merger therefore remains valid, and has been reinforced by the impact of the pandemic. The Merged Entity will have a quality portfolio of strategically-located prime assets, in both central and decentralised locations island-wide to capture evolving demand. With the coming together of CMT’s and CCT’s complementary skill sets, we are confident the Merged Entity will be better positioned to capitalise on future growth opportunities and create long-term value for all unitholders.”
Mr Kevin Chee, CEO of CCTML, said: “Despite COVID-19, Singapore’s retail and office real estate are here to stay and will continue to present opportunities for sector leaders that are best able to cater to evolving customer preferences and changing demands. The Merged Entity will be in a leadership position to take advantage of these new opportunities by reaping the synergies of integrating two best-in-class retail and office platforms to create one of the largest REITs in Asia Pacific. Furthermore, the Merged Entity will be underpinned by resilience as the enlarged and well-balanced portfolio has a reduced asset concentration risk. This resilience will provide the Merged Entity with an improved ability to invest through cycles, and increased flexibility to undertake portfolio rejuvenation and redevelopment. The Proposed Merger is also distribution per unit accretive for all unitholders based on historical pro forma financials.”
"The Merged Entity will have a quality portfolio of strategically-located prime assets, in both central and decentralised locations island-wide to capture evolving demand. With the coming together of CMT’s and CCT’s complementary skill sets, we are confident the Merged Entity will be better positioned to capitalise on future growth opportunities and create long-term value for all unitholders.”
Virtual unitholder meetings
The Proposed Merger is subject to the approvals of the respective unitholders of CMT and CCT representing the requisite majorities at the respective EGMs and the Trust Scheme Meeting. The CMT Trustee, CMTML and its concert parties, as well as the common substantial unitholders of CMT and CCT, are required to abstain from voting on certain resolutions.
Due to the COVID-19 situation in Singapore, unitholders will not be able to attend the EGMs or the Trust Scheme Meeting in person. CMT unitholders may participate in the CMT EGM, and CCT unitholders may participate in the CCT EGM and the Trust Scheme Meeting, by observing and/or listening to the proceedings via live audio-visual webcast or live audio-only stream. Questions can be submitted in advance.
CMT unitholders who wish to register for CMT's EGM and submit questions must do so by 10.30 am on Saturday, 26 September 2020. CCT unitholders who wish to register for CCT's EGM and/or the Trust Scheme Meeting and submit questions must do so by 2.00 pm on Saturday, 26 September 2020. Unitholders who wish to vote must complete and sign the proxy forms for the respective meetings and submit them to the CMT or CCT unit registrars (as the case may be) via email or by post 48 hours before the respective times of the meetings on 29 September 2020. In the lead up to the EGMs and the Trust Scheme Meeting, the managers of CMT and CCT will engage their respective unitholders directly or through investor association(s) and other means.
Independent directors' recommendations
The independent directors of CMTML and CCTML have recommended that their respective unitholders vote in favour of the Proposed Merger, following recommendations from the respective manager's independent financial adviser (IFA) in separate documents issued to unitholders today. CMT's IFA, Australia and New Zealand Banking Group Limited, Singapore Branch, is of the opinion that the Proposed Merger is on normal commercial terms and not prejudicial to the interests of CMT and its minority unitholders. CCT's IFA, Deloitte & Touche Corporate Finance Pte Ltd, is of the opinion that the financial terms of the Trust Scheme are fair and reasonable.
CMTML’s waiver of acquisition fee on a one-off basis
As stated in the circular issued to the CMT unitholders dated 4 September 2020, CMTML has waived 100% of the acquisition fee on a one-off basis (amounting to approximately S$111.2 million), in recognition of the unprecedented circumstances brought about by the COVID-19 pandemic. Both CMT and CCT unitholders will continue to receive permitted distributions in respect of the period from 1 July 2020 up to the day immediately before the date on which the Trust Scheme becomes effective in accordance with its terms.
"The enlarged and well-balanced portfolio has a reduced asset concentration risk, providing the Merged Entity with an improved ability to invest through cycles, and increased flexibility to undertake portfolio rejuvenation and redevelopment. The Proposed Merger is also distribution per unit accretive for all unitholders based on historical pro forma financials."
Transaction rationale and benefits to unitholders
1. Leadership: Best-in-class portfolio supported by a stronger and more efficient platform
Following the Proposed Merger, CICT is expected to be one of the largest REITs in Asia Pacific and the largest REIT in Singapore by market capitalisation and total portfolio property value, with a market capitalisation of approximately S$12.7 billion2. This gives rise to the potential for higher trading liquidity, positive re-rating and a more competitive cost of capital.
CICT will become the largest proxy for Singapore commercial real estate with a portfolio of 24 properties valued at approximately S$22.4 billion3, of which 96% of this value are assets located in Singapore and the remainder in Frankfurt, Germany.
With the enlarged scale of the combined portfolio and its widened mandate, CICT will be better positioned to compete in Singapore and overseas. It will be a more efficient vehicle through realisation of synergies resulting from the Proposed Merger, including cross-selling opportunities, enhanced digital platform and data analytics and cost optimisation.
2. Resilience: Enhanced resilience and stability through market cycles
CICT will have a well-balanced portfolio with diversified exposure across five integrated developments, eight office assets and 11 retail assets, which account for approximately 29%, 38% and 33% of its total property value4 respectively. This provides a hedge against market cycles in any particular sub-sector and improves CICT’s ability to invest through cycles.
Asset concentration risk will also be greatly reduced. Based on figures for the last 12 months ended 30 June 2020, the net property income contribution from the respective top five assets will be reduced from 50% and 82% for CMT and CCT respectively to 43% for CICT.
Due to its larger income and asset base, CICT would be better equipped to mitigate any financial impact from redevelopments and asset enhancement initiatives to create value for unitholders in the longer term, whilst supporting stable distributions to unitholders in the near term.
3. Growth: Greater optionality for growth with broader focus and larger capacity for investment
CICT will be able to leverage the combined domain expertise of CMT and CCT and their proven track records in repositioning their respective portfolios, to capitalise on the overarching trend towards mixed-use precincts and integrated developments – a trend which is expected to be accelerated by the onset of COVID-19.
Within Singapore, CICT’s extensive network of strategically-located prime assets near key transport nodes and in growth clusters identified in the URA Master Plan 2019 will offer opportunities for the Merged Entity to capture evolving demand. While continuing to be predominantly Singapore-focused, CICT will have the flexibility to explore overseas acquisitions of not more than 20% of its total portfolio property value. This broadens its optionality to seek accretive acquisitions.
With a higher development headroom of S$5.8 billion5, CICT will enjoy greater capacity and flexibility to undertake larger redevelopments to capitalise on evolving real estate trends and reposition its portfolio. A bigger funding capacity will also allow CICT to act more swiftly and provide certainty of financing for third party acquisitions, which strengthens its ability to capture opportunistic accretive investments.
4. Accretion: DPU accretive to unitholders
On a pro forma basis, the Proposed Merger will be distribution per unit (DPU) accretive for both CMT and CCT unitholders. The pro forma DPU for the last 12 months ended 30 June 2020 for CMT would have increased 4.1% from 10.52 cents to 10.95 cents, while that for CCT would see an accretion of 7.6% from 8.02 cents to 8.63 cents.
Transaction timeline
The Long-Stop Date for the Implementation Agreement has been extended to 30 November 2020. After obtaining the approvals from the respective unitholders as well as regulatory and other third party approvals, the Proposed Merger is expected to be completed by 30 November 2020. CCT will become a wholly owned sub-trust of CMT and will be delisted from the Singapore Exchange Securities Trading Limited (SGX-ST).
Notes:
1 Or in the event that CCT's EGM concludes before 2.30 pm, as soon thereafter following the conclusion of CCT's EGM.
2 Illustrative market capitalisation of the Merged Entity calculated as the sum of: (i) the market capitalisation of CMT of S$7.2 billion as at 30 June 2020; and (ii) the portion of the Scheme Consideration for all CCT Units to be satisfied by the issuance of 0.720 new CMT Units for each CCT Unit (based on the closing price of a CMT Unit as at 30 June 2020).
3 Based on the aggregate property desktop valuations of the CMT Group and the CCT Group, including proportionate interests of joint ventures, as at 30 June 2020.
4 Based on the valuation of all the properties of the CCT Group as at 30 June 2020 or the combined valuation of the CMT Group and the CCT Group as at 30 June 2020 (as the case may be), including proportionate interests of joint ventures’ valuation.
5 The increased 15.0% headroom for development is subject to the approval of the unitholders of CICT and applicable regulatory requirements.