Newmark manager gets lucky; MS, Highbury stitch up big-premium merger
Champagne corks will be popping at Newmark REIT Management, the manager of the Newmark Property REIT.
On Wednesday, the group agreed terms to an all-scrip merger with owners of Bunnings properties BWP Trust, representing one of the highest premiums ever for a REIT transaction.
Newmark listed the REIT in December 2021 at an issue price of $1.895 and has slowly watched the share price fall 25 per cent to $1 at the end of 2023. Now, its manager is pocketing $22.5 million in the sale. Talk about money for old rope!
Under the agreed terms, investors in the Newmark Property REIT will get 0.4 units in the BWP Trust for each of their Newmark share. It is being executed under a takeover offer, with a 50.1 per cent minimum acceptance condition.
Once done and dusted, Newmark shareholders would own about 10 per cent of the entity. Wesfarmers, which spun out BWP in the late 1990s and owns about 25 per cent, is backing the deal.
The combined entity would have $3.5 billion in assets and a circa $2.5 billion market capitalisation, and could open the gates for more deals in the sector, especially as rate rises stabilise. With many REITs trading at steep discounts, onlookers reckon the sector is ripe for consolidation.
“REITs at big discounts to their net tangible assets where direct assets are performing better than the listed market implied and in sub-sectors with a solid outlook will likely attract interest,” one real estate analyst told Street Talk.
For Newmark, it’s a 43.1 per cent premium to the last close, making it the largest premium a REIT has fetched in an M&A situation in Australia. The deal would halve its gearing from 47 per cent to 23 per cent and induct it into the ASX 200 ranks. For the bigger of the two, BWP, it’s an extra $600 million worth of assets.
Newmark was advised by Morgan Stanley and Herbert Smith Freehills, while Wesfarmers’ backed BWP Trust tapped Highbury Partnership and law firm Corrs Chambers Westgarth for advice.
