LXI REIT agrees share-based merger with Secure Income

The FTSE 250 real estate investment trust said that under the agreed terms of the merger, for each Secure Income share, shareholders would receive 3.32 new LXi shares, with a partial cash alternative available.

Following completion, existing LXi shareholders would hold 53% of the enlarged company.

The boards of LXi and Secure Income said they saw a “strong” strategic, operational and financial rationale for the merger, bolstering the existing highly attractive investment case of each business to create a more compelling investment case for the combined group.

In particular, shareholders in the combined group would benefit from the creation of a business of substantial scale, which would be “well-positioned” to benefit from significant growth opportunities.

There would also be an immediate expected accretion to cash earnings per share, creating the potential for delivering higher dividends through unlocking material cost savings and efficiencies, together with the expectation of further capital growth opportunities to enhance total shareholder returns.

Significant cost savings were also anticipated, estimated at £8.6m per annum.

The boards of both companies said they intended to unanimously recommend shareholders vote in favour of the merger at their upcoming respective general meetings.

“In today's investment climate, more than ever, security and resilience of cash flows, scale and liquidity, underpinned by clear and compelling strategic direction and cost efficiency are essential components of successful REITs,” said LXi chairman Cyrus Ardalan.

“We are delighted to be benefitting from the experience, talent and complementary investment strategies of the LXi REIT advisors and Prestbury investment advisory teams.

“The planned merger of the strongly performing businesses of LXi and SIR will create a substantial, complementary portfolio of attractive operating assets let on long-term, index-linked leases to a diverse group of strong tenants across a diversified mix of robust property sectors.”

Ardalan said shareholders of the combined group would benefit from immediate accretion to cash earnings per share, creating increased scope to deliver higher dividends, through material cost savings and efficiencies, together with further opportunities to enhance the attractive inflation-protected income and capital growth.

“It will also, importantly, further strengthen our position to benefit from significant future growth opportunities to enhance total shareholder returns.”

At 0908 BST, shares in LXi REIT were down 5.06% at 135p, while those in Secure Income REIT were up 9.73% at 451p.

Reporting by Josh White at Sharecast.com.