AREIT Inc [AREIT 34.40 1.1%] [link] said in its comprehensive disclosure on the proposed property-for-share swap with its parent company, Ayala Land [ALI 26.35 0.4%], that it will pay 607,559,380 common AREIT shares, priced at P37.00/share, to acquire P22.5 billion in properties from ALI and other Ayala Group companies.
The fairness opinion produced by FTI Consulting determined that the P37.00/share price was within the “fair range” of shares that could have been transferred, with 502 million being the low end of the range,(~P44.78/share) and 756 million being the high end (~P29.73/share).
The fairness opinion noted that the transaction price was at a slight 3% premium to AREIT’s 30-day volume weighted average price (VWAP) of P35.83/share.
AREIT noted that several matters related to the transaction will be voted on at the stockholders’ meeting in April, including the increase in ARIET’s authorized capital stock needed to issue the shares, and the issuance of the shares as a part of the transaction itself.
AREIT said that ALI would “sell some of its shareholdings in [AREIT] prior to the property-for-shares swap” to maintain on the right side of the PSE’s minimum public ownership threshold for REITs.
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If you’re interested in REITs, this is a great disclosure to get a feel for the issues in play whenever a parent uploads properties into its subsidiary REIT.
The Ayala Group is pretty good at showing as much of its work as possible and trying to resolve any investor uncertainty with proactive disclosures, instead of pumping out the bare minimum and waiting for the subsequent confusion to reveal tiny morsels of additional info.
Neither AREIT nor ALI was very clear about what it meant for ALI to sell “some” of its AREIT shareholdings to remain compliant, so I guess we’ll have to wait for more info there, and there is still a long time to go before AREIT shareholders will be in a position to earn as a result of this deal.
We’ve seen similar property-for-share swaps take nearly a full year to complete the SEC and PSE approvals process.
Yet, even despite that lag, I’m actually surprised that we haven’t seen more parent-to-subsidiary swaps announced during this period of depressed REIT valuations. DDMP [DDMPR 1.40 0.7%] is the only REIT that is technically already at the minimum ownership threshold, which means that every other REIT has a little public ownership overhang that it could use to snatch up assets from the parent at an attractive per-share price for the parent company.
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