Mapletree $3B REIT Merger Targeted by Activist Investor That Sank Sabana Deal 

Opponents of the proposed merger of Singapore-listed Mapletree Commercial Trust and Mapletree North Asia Commercial Trust gained an experienced ally this week in activist investor Quarz Capital Management, which is urging MNACT unitholders to reject the S$4.22 billion ($3.13 billion) deal.

In an open letter to MNACT’s management, Quarz described MCT’s merger offer of S$1.08-$S1.10 per MNACT unit as “opportunistic” and a significant markdown to the net asset value of S$1.23 per unit for the trust, which holds nine office properties in Japan, two in China and one in South Korea, in addition to the Festival Walk mall in Hong Kong.

Singapore-based Quarz, which in 2020 led a successful attempt to scuttle ESR’s plan to merge ESR-REIT and Sabana REIT, is arguing that “multiple key catalysts” like the resurgence of Japan’s manufacturing sector and strong global investor interest are likely to boost MNACT’s price back to pre-pandemic levels of S$1.22 or higher.

“MNACT’s board and management should initiate a transparent and robust process to sell the assets above NAV of S$1.23 instead of recommending the suboptimal offer of S$1.08-S$1.10 from MCT,” chief investment officer Jan Moermann and head of research Havard Chi said in Quarz’s letter dated 9 February.

Lukewarm Reviews

MCT and MNACT are managed by subsidiaries of Mapletree Investments, a unit of Singapore’s Temasek, with the government holding firm also being the largest unitholder in the two trusts. MCT’s SGX-listed units on Friday were trading at S$1.83, down 8.5 percent since the proposed merger was announced on 31 December, while MNACT units were trading at S$1.11, roughly in line with their price at the time of the news.

If shareholders approve MCT’s offer, the merger will establish the expanded Mapletree Pan Asia Commercial Trust as the third-biggest Singapore-listed REIT, with S$17.1 billion in total assets under management across Singapore, China, Hong Kong, Japan and South Korea.

But the merger plan has occasioned some rare dissent from Singapore-based critics and from analysts who view MNACT’s performance as having lagged behind that of MCT, which holds six commercial properties in the city-state.

Last month, Moody’s Investors Service placed MCT’s issuer rating on review for a downgrade in light of the trust’s merger bid.

“The review for downgrade reflects the potential weakening of MCT’s credit metrics and uncertainty around its financial policy following the merger with MNACT,” said Moody’s analyst Junling Tan. “However, the final impact remains uncertain as the merger is still subject to, amongst others, the approval of the unitholders.”

No More Rubber Stamps

Using less diplomatic language, Quarz this week termed the merger proposal “ludicrous and value-destructive” for compelling MNACT unitholders to sell assets at substantially less than their net asset value.

The investment advisory, which identifies as part of a group ranking among the 10 largest MNACT unitholders, previously shook up Singapore’s staid M&A scene by whipping up opposition that ultimately stalled the merger of SGX-listed trusts ESR-REIT and Sabana REIT, a deal it similarly dubbed “value-destructive” and heedless of NAV.

The assault on Mapletree’s REIT merger comes as takeover deals in the Lion City show signs of becoming less predictable, as evidenced by the ongoing bidding war for Singapore Press Holdings’ real estate business by two Temasek-backed firms.

Keppel Corporation’s plan to acquire SPH’s non-media business in a cash-and-scrip deal, first announced last August, drew a rival bid from an unlikely source when Cuscaden Peak in late October proposed an all-cash consideration. After some one-upmanship in subsequent months, SPH this week moved to terminate Keppel’s takeover bid in favour of a vote on Cuscaden’s offer.