HomeCo Daily Needs REIT has agreed a deal to merge with the Aventus Group to create a $4.1bn listed Daily Needs REIT.
The deal is to be implemented under a binding Scheme Implementation Deed (SID) which has the unanimous support of the Boards of both entities.
The deal, significantly accelerates HomeCo’s platform growth with external AUM increasing to approximately $5bn (+127% versus FY21), which is 12 months ahead of HMC’s stated $5bn 2022 target
The merger will create Australia’s leading Daily Needs REIT with a combined portfolio size of $4.1bn and market capitalisation of approximately $3.2bn.
The merger brings together HDN and AVN’s highly complementary portfolios with strong strategic rationale, including:
- Creates Australia’s leading Daily Needs REIT
- Compelling financial metrics
- Future last mile logistics infrastructure
- Significant growth pipeline and investment opportunity
HMC CEO and Managing Director, David Di Pilla said: “The industrial logic of this transaction is very compelling for HDN unitholders and AVN securityholders. The combination of HDN and AVN creates a leading ASX listed Daily Needs REIT with a highly strategic $4.1bn portfolio of last mile logistics infrastructure in Australia’s leading metropolitan growth corridors. This transaction is consistent with our strategy to build high quality portfolios exposed to powerful megatrends and enhanced by best-in-class management teams.
For HMC, the transaction demonstrates the scalability of our platform and our ability to execute large scale M&A transactions to significantly grow external AUM. This transaction positions HMC well ahead of its stated target to grow external AUM to $5bn by the end of 2022.”
Under the merger, AVN securityholders will receive consideration with an implied value of $3.82 per AVN security comprising:
- 2.200 HDN units for every 1 unit in Aventus Retail Property Fund (ARPF); and
- $0.285 cash or 0.038 HMC securities for every 1 share in Aventus Holdings Limited (AHL)
Each AVN securityholder may elect to receive cash or HMC securities as consideration (but not a combination of both) with default consideration being cash.
HDN Chair, Simon Shakesheff said, “We believe the merger is strategically and financially attractive for both HDN and AVN and consistent with HDN’s objective to deliver stable and growing distributions. The increased scale and enhanced capability will allow the merged group to unlock significant value that would not have been accessible on a standalone basis.”
AVN Chairman, Bruce Carter said, “The Merger is attractive for Aventus securityholders, both because of the potential offered by being part of the larger merged groups and because the offer reflects a material premium to Aventus’ trading price and its NTA. After careful consideration, the Aventus Board has concluded that the Merger is in the best interests of Aventus securityholders (other than excluded securityholders) and unanimously recommends that Aventus securityholders (other than excluded securityholders) vote in favour of the Merger, subject to no superior proposal emerging and the Independent Expert concluding in the Independent Expert’s Report (and continuing to conclude) that the Merger in the best interests of Aventus securityholders (other than excluded securityholders)”.
HDN is contributing 93% of the total consideration paid to AVN securityholders to acquire 100% of ARPF, which holds all of AVN’s real estate assets. HMC is contributing the remaining 7% of the total consideration paid to AVN securityholders to acquire 100% of AHL which demonstrates HMC’s commitment to the Merger and strong alignment to the Merged Group which will be externally managed by HMC.
The current implied Offer Price of $3.82 represents a:
- 15.3% premium to AVN’s last close price of $3.31 on 15 October 2021;
- 16.4% premium to AVN’s 1 month VWAP of $3.28 on 15 October 2021; and
- 41.9% premium to AVN’s NTA per security of $2.69 as at 30 June 2021.
Following implementation of the merger, Darren Holland and Lawrence Wong of AVN will be offered roles as CEO and CFO of HDN, respectively. Current AVN directors Darren Holland, Bruce Carter and Robyn Stubbs will also be appointed to the HDN Board.
HDN’s Board believes the Merger represents a unique and compelling opportunity which creates significant value for HDN unitholders and therefore unanimously supports the Merger and recommends that HDN unitholders vote in favour of the Merger.
The AVN Board has unanimously recommended AVN securityholders (other than excluded securityholders) vote in favour of the Merger, in the absence of a superior proposal and subject to an Independent Expert opining that the Merger is in the best interest of AVN securityholders (other than excluded securityholders). Subject to those same qualifications, the AVN Board representing 6.7% of eligible AVN securities, intend to vote in favour of the Merger.
BBRC Retail Capital Pty Ltd and associated entities (BBRC) currently holds a voting interest in approximately 22.6% of all AVN securities. BBRC has confirmed to AVN that, based on disclosed terms of the Merger, it intends to vote in favour of the Schemes in the absence of a superior proposal and subject to the terms of the deal.
HMC and BBRC have entered into put and call options over AVN securities equivalent to 6.0% of issued capital, for a cash amount equal to the Offer Price.
Including the impact of the merger and barring any unforeseen events, HMC upgrades its forecast FY22 pretax FFO per security guidance to 26.0 cents which represents an upgrade of 41% on prior guidance and 89% growth versus FY216. HMC also reaffirms FY22 dividend guidance of 12.0 cents per security.