A bid battle for Alternative Income REIT (AIRE) has broken out with AEW UK REIT (AEWU) returning to the fray with a possible higher all-share offer.

AEWU, a top-performing £169m UK real estate investment trust, said it was “considering” offering 0.725 of its shares for each AIRE share, priced at a 6% discount to AIRE’s net asset value (NAV) but 15% above last night’s closing price.

It said a combination would be earnings accretive to its shareholders and would offer AIRE shareholders greater diversification, increased scale, lower operating costs and its 8p per share annual dividends.

AIRE, one of the smallest REITs in the sector with a market value of £55m, rose 3p, or 4.4%, to 71.6p in early trading. This is just above the improved 71.4p cash per share offer from Glenstone REIT, its largest shareholder, two weeks ago.

AEWU, whose management group AEW previously ran AIRE, had already said it was “monitoring” the situation having previously worked on an all-share offer at 3% below the then NAV.

Under rules set by the Panel on Takeovers and Mergers, AEWU has until 5pm on 28 August to finalise or withdraw the offer, this being the 53^rd day after Glenstone published its offer document.

Our view

James Carthew, head of investment company research at QuotedData, said: “AEWU always looked like a good fit for AIRE so it is great to see it is considering a counter bid. With AEWU shares trading at 107p, its bid is worth 77.6p to AIRE shareholders, which is well ahead of Glenstone’s 70p offer (71.4p if you count the dividend that AIRE shareholders were going to get anyway). This may be enough to seal the deal. It’s ironic that one of the main reasons its last approach did not proceed was that it was not given access to Glenstone – all of this might have been avoided.”