Alternative Income REIT refuses to recommend Glenstone offer

Alternative Income REIT PLC on Tuesday told shareholders to take no action on rival Glenstone REIT PLC’s offer, which it said is at a large discount to net asset value and could endanger minority shareholders.

Both companies are London-based real estate investment trusts. Glenstone announced on Friday its firm intention to make a 70 pence per share cash offer, which values Alternative Income at approximately £56.4 million. Alongside concert parties, Glenstone as of Friday held a roughly 26.36% stake in Alternative Income REIT, or AIRE.

AIRE shares opened higher at 70.00p on Tuesday, but were down 0.7% at 69.00p each later in the morning.

Saying its board has ‘many reasons’ not to recommend Glenstone’s offer to shareholders, AIRE said its main objection was that it represents a 17% discount to the trust’s NAV per share, which was 84.4p as of March 31.

It also said the offer only ‘represents a negligible premium’ to its closing share price of 69.7p on May 14, the last business day before Glenstone said it was considering an offer on May 15.

AIRE also noted that the offer price represented discounts to its three, six and twelve-month volume-weighted average share prices, and was based on the assumption that no dividends or other returns would be paid.

It reiterated its 5.6p per share target dividend for the year ending June 30, and intention to declare a fourth quarterly dividend of 1.4p. It said the payment of this dividend would reduce the offer’s effective value to 68.6p per share, which would be ‘a substantial discount’ of around 19% to its prevailing NAV.

Furthermore, AIRE warned of the ‘potential consequences’ for minority shareholders if the offer succeeded.

It said Glenstone’s intentions to appoint its own board executives, pursue a wind-down and delist AIRE from the London Stock Exchange, ‘would significantly weaken and potentially end the effective checks and balances that the current independent non-executive directors provide.’

AIRE would also no longer be subject to listed company governance requirements, which it finds ‘particularly concerning’ due to ‘possible conflict of interest’ arising from the suggested wind-down.

Also, AIRE noted that Glenstone expects to hold certain AIRE assets ‘for the longer term’.

‘The independent board is also concerned that these measures would not only remove the liquidity and ability for minority shareholders to trade in the company’s shares, but would also mean that there may be limited independent oversight in relation to key decisions, including asset disposals, capital allocation and dividend policy and minority shareholders would have significantly reduced protections compared to those currently in place,’ AIRE explained.

However, it said it ‘has engaged constructively with Glenstone’ and might ‘provide further information’ if the latter submits a proposal that meets AIRE’s threshold for recommendation to shareholders.

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