LXi and Londonmetric agree mega-merger to create UK’s fourth largest real estate investment trust

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The owners of Travelodge are reportedly mulling buying £40m of hotels from their landlords, fuelling speculation the business could be sold.
The owners of Travelodge are reportedly mulling buying £40m of hotels from their landlords, fuelling speculation the business could be sold.

Londonmetric and LXi have today announced they’ve agreed to merge in a deal that will create a £4.1bn giant in the UK property sector.

The two real estate investment trusts (REITs) have been in discussions for some time regarding a merger, with talks first reported back in December. Today’s announcement has confirmed the terms of the deal, which will take the shape of an all-share merger.

Under the terms of the merger shareholders of LXi will receive 0.55 new Londonmetric shares for each LXi share held. The deal values LX at £1.9bn and represents a premium of approximately nine per cent to the last closing price of LXi.

The offer implies a discount of four percent to the net tangible asset value (NTA) of both Londonmetric and LXi.

Following completion, existing Londonmetric shareholders will hold approximately 54 per cent and LXi shareholders will hold approximately 46 per cent of the enlarged group.

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The new company will have an EPRA NTA of approximately £4.1 billion, becoming the fourth-largest UK REIT. Its property portfolio will have a combined value of £6.2bn and there are expected to be substantial cost and operating synergies.

Earlier this week ahead of the deal LXi announced it had agreed to sell 66 of its Travelodge-branded hotels back to Travelodge for £210m as part of its actions to reduce debt.

Andrew Jones chief of LondonMetric, said: “The combined £6.2bn portfolio will have no legacy assets, full occupancy, high occupier contentment and exceptional income longevity with a high certainty of growth – both organically and contractually.

“In the world of income compounding, bigger is better and the deal will deliver economies of scale, substantial cost savings, better liquidity and improved terms in both debt and equity markets which will drive accelerated earnings and dividend progression,” Jones added.

Cyrus Ardalan, chairman of LXi, said: “The merger with LondonMetric will build on the strengths and track records of both LXi and LondonMetric. It will create the UK’s leading triple net lease REIT with an enlarged and more diversified portfolio aligned to structurally supported sectors, a robust and predominantly unsecured capital structure, broader appeal to investors and enhanced share liquidity, and a highly regarded internal management team.”