Transaction details

0.94 new ESR REIT units for every 1.0 Sabana units held. This is an all-stock deal with no cash consideration to be paid out (unlike the previous ESR-Viva deal). ESR units would be issued at an indicative price of $0.401 (vs last traded at $0.39) while this implies a $0.377 price (vs last traded $0.36) for Sabana units.

Rationale

  1. DPU and NAV accretion– According to the pro-forma, this would be DPU accretive to ESR REIT shareholders by 3.5% while Sabana shareholders would enjoy a 12.9% accretion. What is slightly positive to unitholders is that any income retained would have to be paid out before the effective date of completion. In the past quarter, DPU was affected due to amounts retained for Covid-related purposes.

The higher accretion by Sabana could also be a function of the management fees being 60% paid out in units vs 100% cash previously as the pro-forma assumes that Sabana’s fee structure follows that of ESR’s.

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