Warehouse Reit board backs reduced bid from Blackstone

Warehouse Reit (WHR ) has accepted a reduced takeover offer from US investment giant Blackstone, which argued down the value of the portfolio following due diligence.

The board of the real estate investment trust (Reit) has agreed to Blackstone’s £470m offer, which represents a cash offer of 109p per share plus the 1.6p interim dividend that was paid in April. This results in a total consideration of 110.6p per share and is below the total 115p per share offer that Blackstone put forward in March – which was its fifth and final offer.

In April, the Tilstone Partners-managed trust extended Blackstone’s deadline for the final offer to allow the private equity firm extra time to complete its assessment of the portfolio of multi-let warehouses. The sticking point is the valuation of the Radway Green development site in Cheshire, which Blackstone has marked at a lower price.

Shore Capital analyst Andrew Saunders had expected the first phase of the Radway development to sell for £20m, with the second phase following in 2026 to be sold for around £40m.

‘The revised price now equates to an £18.7m reduction in the perceived value of Radway Green,’ he said.

Despite Blackstone knocking down the price of the trust, the 110.6p per share bid represents a 34.2% premium to the 82.4p closing price of the shares on 28 February, the last business day before the offer period started.

It is also a 34.9% premium to the average share price in the month to end of February. WHR shares hit a two-year closing high of 109.6p on 17 April 2023.

Neil Kirton, chair of the trust, said the bid offers shareholder cash at an ‘attractive premium’ in an ‘uncertain macroeconomic backdrop’.

Therefore, the board is recommending shareholders vote in favour of the deal.

‘WHR has, since its IPO in 2017, delivered strong operational performance that demonstrates the quality of our portfolio and our locations, and the resilience of the multi-let industrial market,’ he said.

Over this period, the trust has grown from a seed portfolio of 27 freehold, long-lease warehouses to a diversified portfolio of 445 properties. However, Kirton said ‘despite this success, the company’s growth has been constrained by the weak macroeconomic backdrop, high interest rates, and an inability to raise new equity’.

Saunders said the revised Blackstone bid ‘undervalues the business’ and investors should vote against the deal.

‘The occupier market for the multi-let industrial assets in which WHR specialises remains structurally supported with an attractive long-term outlook,’ he said.

He said the shares are ‘good value’ and should ‘remain underpinned by circling activist investors in the sector and possibility of a counterbid – particularly as clearer evidence begins to emerge of growing earnings momentum and dividend cover being restored on the attractive 6% yield’.

‘Blackstone offers poor value at a time when investors could be shooting for the stars by staying invested,’ he said.