Day Trade - ABRDN Property Income Trust Limited

News of a merger with Custodian Property Income REIT PLC and ABRDN Property Income Trust Limited came in this morning, a summary of their RNS was a follows:

ABRDN PROPERTY INCOME TRUST LIMITED and CUSTODIAN PROPERTY INCOME REIT PLC

Merger Announcement: Custodian Property Income REIT plc ("CREI") and abrdn Property Income Trust Limited ("API") have announced an all-share merger. CREI will acquire all shares of API.

Exchange Ratio: Scheme Shareholders will receive 0.78 New CREI Shares for each Scheme Share.

Post-Merger Ownership: Post-merger, CREI Shareholders will own approximately 59.7%, and API Shareholders about 40.3% of the Combined Group.

Valuation and Premiums:

  - Each API Share valued at 62.1 pence.

  - Total valuation of API's share capital approximately GBP 237 million.

  - Premiums: 29.4% over API's Closing Price, 23.0% over 1-month VWAP, and 26.5% over 3-month VWAP, all as of 18 January 2024.

Dividend Policies: Both CREI and API will maintain their current dividend policies until the Effective Date.

Upcoming Dividends:

  - API Q4 Dividend: Up to 1.0 penny per share for the quarter ended 31 December 2023.

  - CREI Q3 Dividend: Up to 1.375 pence per share for the quarter ended 31 December 2023.

  - Expected payment in late February 2024.

Merger Rationale and Benefits:

  - Portfolio enhancement: Over 200 assets with a combined value of GBP 1.0 billion.

  - Diversification across assets, geographies, and tenants.

  - Focus on below-institutional sized assets.

  - Sector balance, including 44% in the industrial sector.

  - Significant reversionary potential and commitment to sustainability.

  - Cost savings: GBP 1.0 million annual and GBP 2.1 million additional during the Transition Period.

  - Stronger balance sheet with improved refinancing ability.

  - Commitment to a fully covered dividend, potentially increasing for API Shareholders.

  - Enhanced market profile and potential FTSE 250 Index inclusion.

  - Diversified shareholder register and focus on corporate governance.

The key point is that Abrdn Property Income Trust Limited (API) is valued at 62.1p in the merger.

Although its share price rose significantly this morning, increasing by 11.4% to 54.94p, it remains 11.5% below the merger valuation.

It's possible that I've overlooked something, but it's more likely that API's share price hasn't adjusted to the merger value because the market hasn't fully recognized it, given its relatively small size.

Trade

Expected Length: Short Term

Entry Price: 54.95

Price Target: 59.50