NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS, PROSPECTUS EQUIVALENT DOCUMENT OR SCHEME DOCUMENT AND INVESTORS SHOULD NOT MAKE ANY INVESTMENT DECISION IN RELATION TO THE MERGER OR NEW CREI SHARES EXCEPT ON THE BASIS OF INFORMATION IN THE SCHEME DOCUMENT AND THE COMBINED CIRCULAR AND PROSPECTUS WHICH ARE PROPOSED TO BE PUBLISHED IN DUE COURSE

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

FOR IMMEDIATE RELEASE

19 January 2024

RECOMMENDED ALL-SHARE MERGER

OF

ABRDN PROPERTY INCOME TRUST LIMITED

with

CUSTODIAN PROPERTY INCOME REIT PLC

 

to be implemented by means of a Court-sanctioned scheme of arrangement under Part VIII of the Companies (Guernsey) Law, 2008 (as amended) 

Summary and highlights

The boards of Custodian Property Income REIT plc ("CREI") and abrdn Property Income Trust Limited ("API") are pleased to announce that they have reached agreement on the terms and conditions of a recommended all-share merger pursuant to which CREI will acquire the entire issued and to be issued share capital of API (the "Merger"). It is intended that the Merger will be implemented by means of a Court-sanctioned scheme of arrangement under Part VIII of the Companies Law (the "Scheme").

Under the terms of the Merger, Scheme Shareholders will receive:

for each Scheme Share, 0.78 New CREI Shares

(the "Exchange Ratio")

The Exchange Ratio is based on the Rolled-Forward Unaudited EPRA Net Tangible Asset value ("NTA") of each of CREI and API as at 31 December 2023, subject to certain adjustments to reflect post balance sheet asset disposals, the fair value of each company's debt and derivatives, the relative levels of dividend cover between the two companies and the costs expected to be incurred by each party in connection with the Merger. Following completion of the Merger, existing CREI Shareholders will hold approximately 59.7 per cent. and API Shareholders approximately 40.3 per cent. respectively in the CREI Group as enlarged by the API Group (the "Combined Group"). 

Applying the Exchange Ratio to the Closing Price per CREI Share of 79.6 pence on 18 January 2024 (the "Latest Practicable Date") values each API Share at 62.1 pence and the entire issued and to be issued share capital of API at approximately £237 million, and represents a premium of approximately:

29.4 per cent. to the Closing Price of 48.0 pence per API Share on the Latest Practicable Date;

23.0 per cent. to the 1-month volume-weighted average price of 50.5 pence per API Share on the Latest Practicable Date; and

26.5 per cent. to the 3-month volume-weighted average price of 49.1 pence per API Share on the Latest Practicable Date.

 

The boards of CREI and API will retain their current dividend policies for the period to the Effective Date. CREI and API have agreed that API Shareholders will be entitled to receive and retain a quarterly final dividend of up to 1.0 penny per API Share in respect of the quarter ended 31 December 2023 (the "API Q4 Dividend") and that CREI Shareholders will be entitled to receive and retain a quarterly interim dividend of up to 1.375 pence per CREI Share in respect of the quarter ended 31 December 2023 (the "CREI Q3 Dividend"). The API Q4 Dividend and the CREI Q3 Dividend will each be declared on, and paid by reference to, a date falling prior to the Effective Date, consistent with their respective past practices as to timing and amount of such dividends. Payment of each of the API Q4 Dividend and the CREI Q3 Dividend is expected to occur in late February 2024. Further announcements will be made by the boards of CREI and API in due course.

With effect from completion of the Merger, Custodian Capital will provide investment management, administrative and advisory services to the Combined Group pursuant to the terms of the Amended and Restated Investment Management Agreement. It has been agreed between CREI and Custodian Capital that Custodian Capital will waive its management fee in relation to the net asset value ("NAV") attributable to API for the first nine months following completion of the Merger. There will also be a reduction in the management fees payable by CREI to Custodian Capital for a period of two years following completion of the Merger (the "Transition Period"), at the end of which the Management Engagement Committee of CREI intends to conduct its regular review of the terms of Custodian Capital's appointment to ensure that the terms comply with market and industry practice and remain in the best interests of shareholders. In recognition of the waiver and reduction in fees, the CREI Board has agreed to an extension to the term of Custodian Capital's appointment pursuant to the terms of the Amended and Restated Investment Management Agreement until the conclusion of the Transition Period, at which point the contract will revert to being terminable on 12 months' written notice.

API's existing investment management agreement (which includes provisions for an orderly handover) will be terminated. 

Following completion of the Merger, it is expected that the CREI Board will comprise eight directors, with the addition of two of the existing API Directors, Jill May and Sarah Slater. Following the integration of the API portfolio, the CREI Board expects to conduct a review of its succession plan, assessing its composition and size to ensure an appropriate combination of skills, experience, diversity and knowledge, pursuant to which the Board intends to become fully independent.

It is intended that the Merger will be implemented by means of a Court-sanctioned scheme of arrangement under Part VIII of the Companies Law.

API will issue a circular (the "Scheme Document") which will include full details of the Scheme, together with notices of the API Court Meeting and the API General Meeting and the expected timetable, and will specify the action to be taken by Scheme Shareholders. It is expected that the Scheme Document, together with the Forms of Proxy, will be published as soon as practicable and in any event within 28 days of the date of this Announcement (or such later date as may be agreed by CREI and API with the consent of the Panel).

CREI is required to produce a circular and a prospectus (the "Combined Circular and Prospectus") in connection with the Merger (i) to convene a general meeting of CREI Shareholders at which shareholders' approval of an ordinary resolution seeking authority to issue the New CREI Shares will be sought and (ii) to facilitate the admission to trading and listing of the New CREI Shares. It is expected that the Combined Circular and Prospectus will be a single document published at or around the same time as the Scheme Document is published and posted to API Shareholders.

Background to, and reasons for, the Merger

CREI and API share an income-focused investment strategy with an emphasis on regional, below-institutional sized assets that are well-positioned to capture the rental growth and yield advantage available in order to generate higher income returns and capital growth for shareholders.

The CREI Board and the API Board believe that the Merger would bring together two complementary portfolios to create a differentiated REIT with enhanced diversification and share liquidity and a fully covered and sustainable dividend for the Combined Group's shareholders.

The boards of CREI and API believe there is a compelling strategic and financial rationale for the Merger. In particular, shareholders in the Combined Group are expected to benefit from:

A substantially larger portfolio with approximately 200 assets and a combined property value in excess of £1.0 billion as at 31 December 2023; 

An enhanced portfolio diversification by asset, geography and tenant with broad-based regional exposure, with 50% of the Combined Group's income derived from the top 54 tenants and 90% of the Combined Group's income derived from the top 204 tenants, an average lot size of approximately £5.1 million and similar tenant covenant profiles as at 31 December 2023;

A continuation of CREI's focus on below-institutional sized assets which delivers greater diversification, with no single tenant accounting for more than 2% of the Combined Group's rent roll, and supports the performance of the portfolio in a variety of market conditions. This focus enables CREI to find mispriced assets and make counter-cyclical investments in order to secure future rental and capital growth;

A suitable balance between the main commercial property sectors, in keeping with each of CREI's and API's existing policies, including significant exposure to the industrial sector (representing 44% of the Combined Group's ERV as at 31 December 2023) which continues to benefit from low vacancy levels, limited new supply, strong occupier demand and, hence, rental growth; 

Meaningful reversionary potential with the combined ERV of £84.3 million exceeding the combined passing rent of £68.1 million by 24% at 31 December 2023;

A shared commitment to sustainability underpinning the shared asset management strategy with 81% of the combined portfolio holding an EPC rating of C or above;

Material cost savings, comprising:

£1.0 million of recurring annual cost savings realised principally from a reduction in management fees due to CREI's tiered fee structure and the removal of duplicated corporate expenses and other potential operational efficiencies; and  

£2.1 million of additional non-recurring cost savings during the Transition Period as a result of a reduction in management fees payable to Custodian Capital;

A stronger and more resilient balance sheet enhancing the Combined Group's ability to grow and to address future refinancing events, with the expected retention of CREI's and API's existing debt facilities implying a pro forma LTV of approximately 30.2 per cent., a weighted average cost of debt of 5.0 per cent. and a weighted average debt maturity of 3.8 years for the Combined Group as at 31 December 2023. The aggregate debt portfolio of £225 million of fixed rate debt expiring between 2025 - 2032 and the £125 million of revolving credit facilities will allow for the ongoing financing of the Combined Group in the long and short term;

Continued commitment to paying a fully covered dividend, in line with CREI's existing policy and practice since IPO, which is expected to result in an uplift in annual dividends payable to API Shareholders, with an objective of growing the dividend on a sustainable basis;

Creation of an enlarged REIT with an enhanced market profile, broader appeal to investors, greater share liquidity, and the scale to support a larger weighting in key indices with potential for inclusion in the FTSE 250 Index in due course;

Diversification of the shareholder register of the Combined Group with a broad mix of private and institutional investors, while enabling mutual shareholders to consolidate their holdings across the two companies; and

Continued focus on corporate governance, with the CREI Board benefiting from the added expertise of certain API Directors and the transition to a fully independent board following the integration of the two companies.

The Combined Group's pro forma sector weighting by ERV as at 31 December 2023 is shown below:

	Weighting by ERV (as at 31 December 2023)
Sector	CREI	API	Combined Group
Industrial	41%	48%	44%
Office	16%	25%	20%
Retail warehousing	22%	11%	18%
Other(*)	13%	12%	12%
High street retail	8%	4%	6%

^{(*) 'Other' sectors include: (i) in respect of the CREI portfolio, pubs and restaurants, gyms, drive-throughs, motor trade, leisure and trade counter; and (ii) in respect of the API portfolio, leisure, data centres, student housing, hotels (and apart-hotels) and healthcare.}

The Combined Group's pro forma weighting by tenant quality as at 31 December 2023 is shown below:

	Weighting by ERV (as at 31 December 2023)
Experian risk rating	CREI	API	Combined Group
Government	2%	9%	5%
Very low risk	57%	51%	54%
Low risk	8%	14%	10%
Below average risk	13%	10%	12%
Above average risk	8%	5%	7%
High risk	2%	1%	2%
Other	11%	9%	10%

Background to, and reasons for, the API Directors' recommendation

API has consistently sought to meet shareholders' objectives by investing in good quality assets that have the potential to provide an above market level of total return as well as an attractive level of income that has scope to grow. API has achieved this through successful capital rotation and active asset management resulting in an attractive portfolio, with industrial assets constituting 48% of the portfolio by ERV as at 31 December 2023.

Over the last 18 months, however, API along with other diversified investment trusts has had to contend with the significant challenges facing the real estate sector as a whole, with rising inflation leading to a substantial increase in interest rates to levels not seen since before the Global Financial Crisis. This in turn has impacted investor sentiment, real estate capital values, transaction volumes and equity market liquidity, notwithstanding operational robustness in many sub-sectors of the market, including those to which API has significant exposure.

In API's case, these challenges have been compounded by the relatively small scale of the company and in particular the need to refinance its debt facility (consisting of a term loan and revolving credit facility) in late 2022, ahead of the previous maturity date in April 2023, at a time when politically induced gilt market volatility was at its height. API currently pays an annualised dividend of 4 pence per share which is not covered by EPRA earnings, with cover of approximately 80% for the last reported quarter ended 30 September 2023. In recognition of these challenges, and the impact on API's share price and discount to EPRA NTA per share, the Board elected to undertake a comprehensive review of API's strategic options in Q3 2023 with the objective of potentially delivering an uplift in value for API Shareholders, as well as increased share liquidity and an enhanced and fully covered dividend for API Shareholders.

Having assessed a wide range of potential strategic options in detail, the API Board believes that there is a strong strategic and financial rationale for a combination with CREI, noting in particular:

That based on the Closing Price per CREI Share, the exchange ratio represents a premium of approximately 29.4% to API's Closing Price, 23.0% to API's 1-month volume-weighted average price and 26.5% to API's 3-month volume-weighted average price as at the Latest Practicable Date;

API Shareholders are expected to experience an annualised uplift in dividends of 7.3% (based on the Exchange Ratio and CREI's target dividend of 5.5 pence per share) with the dividend being fully covered;

CREI's and API's shared income-focused approach to investing in diversified UK commercial property, the complementary nature of their two portfolios, similar sectoral weightings and sustainability credentials;

The enhanced capital structure of the Combined Group and its superior ability to address future refinancing events as a consequence;

The opportunity for API Shareholders to remain invested, with ongoing exposure to API's attractive portfolio and its growth prospects through holding shares in the Combined Group;

The superior valuation at which the CREI Shares have historically traded relative to API's, with an average discount to EPRA NTA per share of approximately 11% over the last year, compared to approximately 37% for API, and approximately 10% over the last 3 years compared to approximately 29% for API;

The anticipated increase in share liquidity by virtue of the Combined Group's enhanced scale, potential index weightings and broader appeal to investors;

The strong track record of Custodian Capital, as demonstrated by CREI's total shareholder returns over time relative to peers; and

The commitment of the CREI Board to strong corporate governance, including through the appointment of two API Directors to the CREI Board and the transition to a fully independent board following the integration of the two companies.

In summary, the API Board is firmly of the view that a combination with CREI represents an attractive opportunity for API Shareholders to benefit from a significant premium to the current share price and enhanced share liquidity and dividend income through continued investment in a differentiated REIT of improved scale.

Recommendations

The API Directors, who have been so advised by Lazard & Co., Limited ("Lazard") as to the financial terms of the Merger, consider the terms of the Merger to be fair and reasonable. In providing its advice to the API Directors, Lazard has taken into account the commercial assessments of the API Directors. Lazard is providing independent financial advice to the API Directors for the purposes of Rule 3 of the Takeover Code.

Accordingly, the API Directors intend to recommend unanimously that Scheme Shareholders vote in favour of the Scheme at the API Court Meeting (or, in the event that the Merger is implemented by way of a Takeover Offer, to accept or procure the acceptance of the Takeover Offer) and that API Shareholders vote in favour of the API Resolution to be proposed at the API General Meeting, as the API Directors have irrevocably undertaken to do in respect of their own beneficial holdings of, in aggregate, 295,092 API Shares, representing approximately 0.08 per cent. of the issued ordinary share capital of API on the Latest Practicable Date.

In order to allot and issue the New CREI Shares, CREI will be required to seek the approval of CREI Shareholders of the CREI Resolution at the CREI General Meeting. The Merger is accordingly conditional on the approval of the CREI Shareholders of the CREI Resolution at the CREI General Meeting.

The CREI Directors consider the Merger to be in the best interests of CREI Shareholders as a whole and intend unanimously to recommend that CREI Shareholders vote in favour of the CREI Resolution to be proposed at the CREI General Meeting, as those CREI Directors, together with certain of Ian Mattioli's close relatives and related trusts, who hold CREI Shares have irrevocably undertaken to do in respect of their own holdings of, in aggregate, 6,204,817 CREI Shares, representing approximately 1.41 per cent. of the issued ordinary share capital of CREI on the Latest Practicable Date.

Letter of intent

In addition to the irrevocable undertakings referred to above received from the API Directors, CREI has received a letter of intent to vote in favour of the resolutions relating to the Merger at the API Meetings (or in the event that the Merger is implemented by a Takeover Offer, to accept such Takeover Offer) from Brooks Macdonald Asset Management in respect of 11,376,425 API Shares, representing approximately 2.98 per cent. of the issued ordinary share capital of API on the Latest Practicable Date.

In total, CREI has therefore received irrevocable undertakings and a letter of intent, including those irrevocable undertakings from all API Directors, in respect of, in aggregate, 11,671,517 API Shares, representing approximately 3.06 per cent. of the issued ordinary share capital of API on the Latest Practicable Date.

Further details of these irrevocable undertakings and letter of intent are set out in Appendix 3 to this Announcement.

Information on CREI

CREI, established in 2014, is a UK real estate investment trust which seeks to deliver an enhanced income return by investing in a diversified portfolio of smaller, regional, Core/Core-plus properties let to predominantly institutional grade tenants across the UK. CREI seeks to provide investors with an attractive level of income and the potential for capital growth from a portfolio with strong environmental credentials, becoming the REIT of choice for private and institutional investors seeking high and stable dividends from well-diversified UK real estate. In line with CREI's published growth strategy, its investment policy has been amended to specify that CREI is committed to seeking further growth, which may involve strategic property portfolio acquisitions and corporate consolidation, such transactions potentially including public and private companies, holding companies and special purpose vehicles.

CREI's portfolio was valued at £602 million as at 31 December 2023 with an EPRA Topped-Up Net Initial Yield of 6.2%, a reversionary yield of 7.8%, a 41% weighting by ERV to industrial assets and Rolled-Forward Unaudited EPRA NTA of £413 million or 93.7 pence per CREI Share. As at the Latest Practicable Date, CREI had a market capitalisation of £351 million. CREI is externally managed by Custodian Capital, a property management and investment business which is regulated by the FCA.

A fundamental element of CREI's strategy is to target smaller sized properties, principally characterised by properties with individual values of less than £10 million at acquisition, to capture the yield advantage available relative to larger sized properties. In the period from 2010 - 2023, data sourced from PropertyData⁽¹⁾ shows that there is a transaction yield advantage of approximately 150 basis points between properties with individual values below £10 million versus properties with individual values above £10 million, compared to a yield advantage of approximately 60 basis points between 2000 - 2010. The CREI Board believes that this implied increase in yield differential since 2010 is not entirely reflective of a rise in risk associated with smaller properties but also due to a change in the supply and demand dynamics in the market. The CREI Board believes these dynamics are principally because of an increase in strategies that pursue larger sized properties, which has resulted in a reduction in the associated yields, which has coincided with those same investors reducing their exposure to smaller sized properties and thus increasing the supply of such assets and associated yields.

Custodian Capital is a wholly-owned subsidiary of Mattioli Woods plc ("Mattioli Woods"), the specialist wealth management and employee benefits business, with in excess of £15 billion of assets under management, administration or advice. CREI entered the UK REIT regime on 27 March 2014. As a consequence of CREI continuing to be a UK REIT and meeting the relevant conditions, it should not be subject to UK corporation tax on the profits (income and capital gains) derived from its investment property portfolio and while CREI remains within the UK REIT regime, the disposal of any properties currently held by it and used within its property rental business should continue to be tax exempt.

^{(1) Average transaction yields between Q1 2010 - Q1 2023 as per PropertyData.}

 

 

Information on API

API, established in 2003, is a UK real estate investment trust investing in a diversified portfolio of UK commercial properties in the industrial, office, retail and "other" sectors with the objective of providing shareholders with an attractive level of income together with the prospect of income and capital growth.

API's portfolio was valued at £439 million as at 31 December 2023 with an EPRA Topped-Up Net Initial Yield of 5.4%, a reversionary yield of 7.3%, a 48% weighting by ERV to industrial assets and Rolled-Forward Unaudited EPRA NTA of £299 million or 78.5 pence per API share. As at the Latest Practicable Date, API had a market capitalisation of £183 million.

Timetable and Conditions

It is intended that the Merger will be implemented by way of a Court-sanctioned scheme of arrangement under Part VIII of the Companies Law. Subject to the Panel's consent, CREI reserves the right to implement the Merger by way of a Takeover Offer.

The terms of the Merger and resolutions concerning related matters will be put to the Scheme Shareholders at the API Court Meeting, to the API Shareholders at the API General Meeting and to the CREI Shareholders at the CREI General Meeting. The Merger is conditional upon the resolutions to be put to the Scheme Shareholders at the API Court Meeting and the API Shareholders at the API General Meeting and the CREI Resolution being passed by the requisite majorities. In order to become Effective, the Scheme must be approved by a majority in number of Scheme Shareholders present and voting (and entitled to vote) at the API Court Meeting, whether in person or by proxy, representing at least 75 per cent. of the voting rights of such Scheme Shareholders. In addition, at the API General Meeting, the API Resolution to authorise the API Board to implement the Scheme and to amend the Articles must be passed by API Shareholders representing at least 75 per cent. of the votes validly cast on the resolution, whether in person or by proxy. The API General Meeting will be held immediately after the API Court Meeting. At the CREI General Meeting the CREI Resolution requires the approval of a simple majority of votes cast, in person or by proxy, in order to be passed. The CREI General Meeting will be held simultaneously with the API Meetings.

The Merger will be made in accordance with the Takeover Code and on the terms and subject to the Conditions which are set out in Appendix 1 to this Announcement and on the further terms and conditions that will be set out in the Scheme Document.

It is expected that the Scheme Document containing further information about the Merger and notices of the API Meetings, together with the Forms of Proxy, and the Combined Circular and Prospectus containing further information on CREI and the Combined Group and notice of the CREI General Meeting will be published within 28 days of the date of this Announcement (or such later date as may be agreed by CREI and API with the consent of the Panel). It is currently expected that the Scheme will become Effective in early April 2024.

Comments on the Merger

Commenting on the Merger, David MacLellan, Chairman of CREI said:

"The Board is pleased to announce the merger of CREI and API which it firmly believes will benefit both our existing and new shareholders. This transaction creates a well-positioned REIT of significant scale, giving the Combined Group's shareholders the opportunity to participate in the returns from the complementary API and CREI portfolios, with a fully covered and sustainable dividend and a focus on ESG.

In the current interest rate environment, security and resilience of cash flows, scale and liquidity, supported by a clear and compelling strategic direction are the defining characteristics of a successful REIT. The challenges the wider listed property sector has faced over the last 18 months highlight the merits of CREI's differentiated approach and operational robustness, which contribute to CREI's strong rating relative to its peers. The income and income growth characteristics of the API portfolio should enable the merged entity to optimise earnings and maintain CREI's progressive dividend policy.

Shareholders in the Combined Group will benefit from material cost savings and efficiencies along with benefitting from significant future growth opportunities to enhance shareholder returns".

Commenting on the Merger, James Clifton-Brown, Chair of API said:

"API has always sought to focus on delivering attractive, income-driven returns for shareholders. Over the years, API's manager, abrdn Fund Managers, has assembled an attractive portfolio on the company's behalf, with a weighting to more favoured areas of the market, a diversified tenant base and a focus on ESG. The board of API would like to thank the management team for the important role they have played in assembling and managing the portfolio.

The Merger will enable API Shareholders to retain exposure to the portfolio and its growth prospects at a significant premium to API's share price, with the prospect of superior share liquidity and an enhanced and fully covered dividend. The API Board believes that, with increased scale and an enhanced capital structure, the Combined Group will be well positioned for the future. The API Board is therefore pleased to recommend the Merger to API Shareholders."

This summary should be read in conjunction with, and is subject to, the full text of this Announcement and its Appendices. The Merger will be subject to the Conditions and further terms set out in Appendix 1 and to the full terms and conditions which will be set out in the Scheme Document. Appendix 2 to this Announcement contains the sources of information and bases of calculation of certain information contained in this Announcement. Summary details of the irrevocable undertakings and letter of intent received by CREI are set out in Appendix 3. Property valuation reports for CREI and API (each as at 31 December 2023) are set out in Appendix 4 pursuant to Rule 29 of the Takeover Code. Certain terms used in this summary and this Announcement are defined in Appendix 6.

A pre-recorded video briefing in relation to the Merger, presented by Richard Shepherd-Cross of Custodian Capital, is available on CREI's website at www.custodianreit.com.  

Enquiries

Custodian Property Income REIT plc (CREI) David MacLellan (Chair)	via Deutsche Numis
Deutsche Numis (Financial Adviser and Corporate Broker to CREI) Nathan Brown Stuart Ord Alexander Kladov George Shiel	+44 20 7260 1000‎
FTI Consulting (Financial PR Adviser to CREI) Richard Sunderland Andrew Davis Oliver Parsons	+44 20 3727 1000
abrdn Property Income Trust Limited (API) James Clifton-Brown (Chair)	via Winterflood
Lazard (Financial Adviser to API) Patrick Long Jolyon Coates	+44 20 7187 2000
Winterflood (Corporate Broker to API) Neil Langford	+44 20 3100 0160

Stephenson Harwood LLP is acting as English legal adviser to CREI in connection with the Merger.

Addleshaw Goddard LLP is acting as English legal adviser to API in connection with the Merger.

Important notices

Numis Securities Limited (which is trading for these purposes as Deutsche Numis) ("Deutsche Numis"), which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting exclusively for CREI and for no one else in connection with the Merger and/or any other matter referred to in this Announcement and will neither regard any other person as its client nor be responsible to anyone other than CREI for providing the protections afforded to its clients or for providing advice in connection with the Merger, the contents of this Announcement, or any other matters referred to in this Announcement. Neither Deutsche Numis nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct, indirect, consequential, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Deutsche Numis in connection with this Announcement, any statement or other matter or arrangement referred to herein or otherwise.

Lazard & Co., Limited ("Lazard"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively as financial adviser to API and no one else in connection with the matters set out in this Announcement and will not be responsible to anyone other than API for providing the protections afforded to clients of Lazard nor for providing advice in relation to the matters set out in this Announcement. Neither Lazard nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lazard in connection with this Announcement, any statement contained herein or otherwise.

Winterflood Securities Limited ("Winterflood"), which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting exclusively for API and no-one else in connection with the matters set out in this Announcement and will not be responsible to anyone other than API for providing the protections afforded to customers of Winterflood or for providing advice in relation to the matters set out in this Announcement. Neither Winterflood nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Winterflood in connection with this Announcement, any statement contained herein or otherwise.

Further information

This Announcement is for information purposes only and is not intended to and does not constitute, or form part of an offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to the Merger or otherwise, nor shall there be any sale, issuance or transfer of securities of API in any jurisdiction in contravention of applicable law. The Merger will be made solely pursuant to the terms of the Scheme Document (or, if the Merger is implemented by way of a Takeover Offer, the Offer Document), which will contain the full terms and conditions of the Merger, including details of how API Shareholders may vote in respect of the Merger. Any vote, approval, decision in respect of, or other response to, the Merger should be made only on the basis of the information contained in the Scheme Document and the Combined Circular and Prospectus (or any other document by which the Merger is made by way of a Takeover Offer).

CREI will prepare the Combined Circular and Prospectus, containing information on the New CREI Shares and the Combined Group. CREI and API urge API Shareholders to read the Scheme Document and the Combined Circular and Prospectus carefully when they become available because they will contain important information in relation to the Merger, the New CREI Shares and the Combined Group. 

The statements contained in this Announcement are made as at the date of this Announcement, unless some other time is specified in relation to them, and the release of this Announcement shall not give rise to any implication that there has been no change in the facts set out in this Announcement since such date. This Announcement does not constitute a prospectus or prospectus equivalent document.

No person should construe the contents of this Announcement as legal, financial or tax advice. If you are in any doubt about the contents of this Announcement or the action you should take, you are recommended to seek your own independent financial advice immediately from your stockbroker, bank manager, solicitor, accountant or from an independent financial adviser duly authorised under FSMA if you are resident in the United Kingdom, or another appropriately authorised independent financial adviser, if you are in a territory outside the United Kingdom.

Neither the GFSC nor the States of Guernsey take any responsibility for the financial soundness of API or for the correctness of any of the statements made or opinions expressed with regard to it.

Overseas Shareholders

This Announcement has been prepared for the purpose of complying with Guernsey law, English law, the Takeover Code, the Market Abuse Regulation, the Disclosure Guidance and Transparency Rules and the Listing Rules and information disclosed may not be the same as that which would have been disclosed if this Announcement had been prepared in accordance with the laws of jurisdictions outside the United Kingdom or Guernsey. Nothing in this Announcement should be relied on for any other purpose.

The release, publication or distribution of this Announcement in or into certain jurisdictions other than the United Kingdom or Guernsey may be restricted by the laws and/or regulations of those jurisdictions and therefore persons into whose possession this Announcement comes who are subject to the laws and/or regulations of any jurisdiction other than the United Kingdom or Guernsey should inform themselves about and observe any such applicable laws and/or regulations in their jurisdiction. In particular, the ability of persons who are not resident in the United Kingdom or Guernsey to vote their Scheme Shares or API Shares (as applicable) with respect to the Scheme at the API Court Meeting or the API Resolution at the API General Meeting, or to appoint another person as proxy to vote at the API Court Meeting or the API General Meeting on their behalf, may be affected by the laws of the relevant jurisdiction in which they are located. Further details in relation to Overseas Shareholders will be contained in the Scheme Document. Any failure to comply with any such restrictions may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law, the companies and persons involved in the Merger disclaim any responsibility or liability for the violation of such restrictions by any person.

Unless otherwise determined by CREI or required by the Takeover Code, and permitted by applicable law and regulation, the Merger will not be made available, in whole or in part, directly or indirectly, in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction and no person may vote in favour of the Merger by any such use, means, instrumentality or from within a Restricted Jurisdiction or any other jurisdiction if to do so would constitute a violation of the laws of that jurisdiction. Copies of this Announcement and any formal documentation relating to the Merger are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in or into or from any Restricted Jurisdiction and persons receiving such documents (including custodians, nominees and trustees) must not mail or otherwise forward, distribute or send them in or into or from any Restricted Jurisdiction. Doing so may render invalid any related purported vote in respect of the Merger. If the Merger is implemented by way of a Takeover Offer (unless otherwise permitted by applicable law and regulation), the Takeover Offer may not be made directly or indirectly, in or into, or by the use of mails or any means or instrumentality (including, but not limited to, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or of any facility of a national, state or other securities exchange of any Restricted Jurisdiction and the Takeover Offer may not be capable of acceptance by any such use, means, instrumentality or facilities.

Further details in relation to Overseas Shareholders will be contained in the Scheme Document.

Forward-looking statements

This Announcement (including information incorporated by reference into this Announcement), oral statements made regarding the Merger, and other information published by CREI and API contain statements about CREI, API and/or the Combined Group that are or may be deemed to be "forward-looking statements". All statements other than statements of historical facts included in this Announcement, may be forward-looking statements. Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of CREI and API about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements.

 

The forward-looking statements contained in this Announcement include statements relating to the expected effects of the Merger on CREI and API, the expected timing and scope of the Merger and other statements other than historical facts. Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as "plans", "expects" or "does not expect", "is expected", "is subject to", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Forward looking statements include statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; and (ii) business and management strategies and the expansion and growth of CREI's or API's or the Combined Group's operations and potential synergies resulting from the Merger.

Although CREI and API believe that the expectations reflected in such forward-looking statements are reasonable, neither CREI nor API can give assurance that such expectations will prove to be correct. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future.

There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These factors include, but are not limited to: the ability to complete the Merger; the ability to obtain requisite regulatory and shareholder approvals and the satisfaction of other Conditions on the proposed terms; changes in the global political, economic, business and competitive environments and in market and regulatory forces; changes in future exchange and interest rates; changes in tax rates; future business combinations or disposals; changes in general economic and business conditions; changes in the behaviour of other market participants; the anticipated benefits from the Merger not being realised as a result of changes in general economic and market conditions in the countries in which CREI and API operate; weak, volatile or illiquid capital and/or credit markets; changes in the degree of competition in the geographic and business areas in which CREI and API operate; and changes in laws or in supervisory expectations or requirements. Other unknown or unpredictable factors could cause actual results to differ materially from those expected, estimated or projected in the forward-looking statements. If any one or more of these risks or uncertainties materialises or if any one or more of the assumptions proves incorrect, actual results may differ materially from those expected, estimated or projected. Such forward-looking statements should therefore be construed in the light of such factors.

Neither CREI nor API, nor any of their respective associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this Announcement will actually occur. Given the risks and uncertainties, you are cautioned not to place any reliance on these forward-looking statements. Other than in accordance with their legal or regulatory obligations, neither CREI nor API is under any obligation, and each of CREI and API expressly disclaim any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Disclosure requirements of the Takeover Code

Under Rule 8.3(a) of the Takeover Code, any person who is interested in 1 per cent. or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 p.m. (London time) on the 10th Business Day following the commencement of the offer period and, if appropriate, by no later than 3.30 p.m. (London time) on the 10^th Business Day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 p.m. (London time) on the Business Day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Quantified Financial Benefits Statement

Statements of estimated cost savings and synergies relate to future actions and circumstances which, by their nature, involve risks, uncertainties and contingencies. As a result, the cost savings and synergies referred to may not be achieved, may be achieved later or sooner than estimated, or those achieved could be materially different from those estimated. Neither the Quantified Financial Benefits Statement nor any other statement in this Announcement should be construed as a profit forecast or interpreted to mean that the Combined Group's earnings in the first full year following the Effective Date, or in any subsequent period, would necessarily match or be greater than or be less than those of CREI or API for the relevant preceding financial period or any other period. For the purposes of Rule 28 of the Takeover Code, the Quantified Financial Benefits Statement contained in this Announcement is the responsibility of CREI and the CREI Directors.

 

No profit forecasts or estimates

No statement in this Announcement is intended as a profit forecast or profit estimate for any period and no statement in this Announcement should be interpreted to mean that earnings or earnings per share for CREI or API for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share for CREI or API.

Rounding

Certain figures included in this Announcement have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

Publication on a website

In accordance with Rule 26.1 of the Takeover Code, a copy of this Announcement will be made available, subject to certain restrictions relating to persons resident in Restricted Jurisdictions, on CREI's website at www.custodianreit.com and API's website at www.abrdnpit.co.uk by no later than 12 noon (London time) on the first Business Day following the date of this Announcement.

For the avoidance of doubt, neither the contents of these websites nor the contents of any websites accessible from any hyperlinks is incorporated into or forms part of this Announcement.

Requesting hard copy documents

In accordance with Rule 30.3 of the Takeover Code, API Shareholders may request a hard copy of this Announcement (and any information incorporated by reference in this Announcement), free of charge, by contacting Northern Trust International Fund Administration Services (Guernsey) Limited ("Northern Trust") during business hours on 01481 745001 (from within the United Kingdom) and +44 (0) 1481 745001 (from outside the United Kingdom) or by submitting a request in writing to The Company Secretary, at team_api@ntrs.com. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines will be open between 9.00 a.m. to 5.30 p.m., Monday to Friday excluding public holidays in England and Wales.

For persons who receive a copy of this Announcement in electronic form or via a website notification, a hard copy of this Announcement will not be sent unless so requested. Such persons may also request that all future documents, announcements and information to be sent to them in relation to the Merger should be in hard copy form.

Scheme Process

In accordance with Section 5 of Appendix 7 of the Takeover Code, API will announce through a Regulatory Information Service key events in the Scheme process including the outcomes of the API Meetings and the Sanction Hearing.

Unless otherwise consented to by the Court and the Panel, any modification or revision to the Scheme will be made no later than the date which is 14 days prior to the API Meetings (or any later date to which such meetings are adjourned). In accordance with Section 11 of Appendix 7 of the Takeover Code, if the Scheme lapses or is withdrawn all documents of title and other documents lodged will be returned as soon as practicable and in any event within 14 days of such lapsing or withdrawal.

Information relating to API Shareholders

Please be aware that addresses, electronic addresses and certain other information provided by API Shareholders, persons with information rights and other relevant persons for the receipt of communications from API may be provided to CREI during the Offer Period as required under Section 4 of Appendix 4 to the Takeover Code to comply with Rule 2.11(c) of the Takeover Code.

Rule 2.9 of the Takeover Code

For the purposes of Rule 2.9 of the Takeover Code, CREI confirms that, as at the close of business on the Latest Practicable Date, it had in issue 440,850,398 ordinary shares of one penny which carry voting rights of one vote per share and are admitted to trading on the London Stock Exchange with ISIN GB00BJFLFT45.

For the purposes of Rule 2.9 of the Takeover Code, API confirms that, as at the close of business on the Latest Practicable Date (being the last Business Day before the date of this Announcement), it had in issue 381,218,977 ordinary shares of one penny each (excluding any shares held as treasury shares) which carry voting rights of one vote per share and are admitted to trading on the London Stock Exchange with ISIN GB0033875286.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS, PROSPECTUS EQUIVALENT DOCUMENT OR SCHEME DOCUMENT AND INVESTORS SHOULD NOT MAKE ANY INVESTMENT DECISION IN RELATION TO THE MERGER OR NEW CREI SHARES EXCEPT ON THE BASIS OF INFORMATION IN THE SCHEME DOCUMENT AND THE COMBINED CIRCULAR AND PROSPECTUS WHICH ARE PROPOSED TO BE PUBLISHED IN DUE COURSE

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

FOR IMMEDIATE RELEASE

19 January 2024

RECOMMENDED ALL-SHARE MERGER

OF

ABRDN PROPERTY INCOME TRUST LIMITED

with

CUSTODIAN PROPERTY INCOME REIT PLC

 

to be implemented by means of a Court-sanctioned scheme of arrangement under Part VIII of the Companies (Guernsey) Law, 2008 (as amended) 

SUMMARY AND HIGHLIGHTS

The boards of CREI and API are pleased to announce that they have reached agreement on the terms and conditions of a recommended all-share merger pursuant to which CREI will acquire the entire issued and to be issued share capital of API (the "Merger"). It is intended that the Merger will be implemented by means of a Court-sanctioned scheme of arrangement under Part VIII of the Companies Law (the "Scheme").

Under the terms of the Merger, which will be subject to the Conditions and further terms set out in Appendix 1 to this Announcement and to the full terms and conditions which will be set out in the Scheme Document, Scheme Shareholders will be entitled to receive:

for each Scheme Share, 0.78 New CREI Shares

The Exchange Ratio is based on the Rolled-Forward Unaudited EPRA NTA of each of CREI and API as at 31 December 2023, subject to certain adjustments to reflect post balance sheet asset disposals, the fair value of each company's debt and derivatives, the relative levels of dividend cover between the two companies and the costs expected to be incurred by each party in connection with the Merger. Following completion of the Merger, existing CREI Shareholders will hold approximately 59.7 per cent. and API Shareholders approximately 40.3 per cent. respectively in the Combined Group.

Applying the Exchange Ratio to the Closing Price per CREI Share of 79.6 pence as at the Latest Practicable Date values each API Share at 62.1 pence and the entire issued and to be issued share capital of API at approximately £237 million, and represents a premium of approximately:

29.4 per cent. to the Closing Price of 48.0 pence per API Share on the Latest Practicable Date;

23.0 per cent. to the 1-month volume-weighted average price of 50.5 pence per API Share on the Latest Practicable Date; and

26.5 per cent. to the 3-month volume-weighted average price of 49.1 pence per API Share on the Latest Practicable Date.

Appendix 4 to this Announcement contains reports from independent property valuers for CREI's and API's property assets, each as at 31 December 2023, pursuant to the requirements of Rule 29 of the Takeover Code. These property valuation reports will, subject to the requirements of the Takeover Code, be reproduced in the Combined Circular and Prospectus and the Scheme Document, which are expected to be published as soon as reasonably practicable and in any event within 28 days of this Announcement (or such later date as may be agreed by CREI and API with the consent of the Panel). Each of Knight Frank and Savills has given and not withdrawn its consent to the publication of its valuation report in this Announcement in the form and context in which it is included.

It is expected that the Scheme Document will be published as soon as practicable and, in any event, within 28 days of this Announcement, unless CREI and API otherwise agree, and the Panel consents, to a later date. It is expected that the API Court Meeting and the API General Meeting will be held in February 2024 and that, subject to the satisfaction of the Conditions and the further terms set out in Appendix 1 to this Announcement and to be set out in full in the Scheme Document, the Scheme is expected to become Effective in early April 2024.

Background to, and reasons for, the Merger

CREI and API share an income-focused investment strategy with an emphasis on regional, below-institutional sized assets that are well-positioned to capture the rental growth and yield advantage available in order to generate higher income returns and capital growth for shareholders.

The CREI Board and the API Board believe that the Merger would bring together two complementary portfolios to create a differentiated REIT with enhanced diversification and share liquidity and a fully covered and sustainable dividend for the Combined Group's shareholders.

The boards of CREI and API believe there is a compelling strategic and financial rationale for the Merger. In particular, shareholders in the Combined Group are expected to benefit from:

A substantially larger portfolio with approximately 200 assets and a combined property value in excess of £1.0 billion as at 31 December 2023; 

An enhanced portfolio diversification by asset, geography and tenant with broad-based regional exposure, with 50% of the Combined Group's income derived from the top 54 tenants and 90% of the Combined Group's income derived from the top 204 tenants, an average lot size of approximately £5.1 million and similar tenant covenant profiles as at 31 December 2023;

A continuation of CREI's focus on below-institutional sized assets which delivers greater diversification, with no single tenant accounting for more than 2% of the Combined Group's rent roll, and supports the performance of the portfolio in a variety of market conditions. This focus enables CREI to find mispriced assets and make counter-cyclical investments in order to secure future rental and capital growth; 

A suitable balance between the main commercial property sectors, in keeping with each of CREI's and API's existing policies, including significant exposure to the industrial sector (representing 44% of the Combined Group's ERV as at 31 December 2023) which continues to benefit from low vacancy levels, limited new supply, strong occupier demand, and hence rental growth; 

Meaningful reversionary potential with the combined ERV of £84.3 million exceeding the combined passing rent of £68.1 million by 24% at 31 December 2023;

A shared commitment to sustainability underpinning the shared asset management strategy with 81% of the combined portfolio holding an EPC rating of C or above;

Material cost savings, comprising:

£1.0 million of recurring annual cost savings realised principally from a reduction in management fees due to CREI's tiered fee structure and the removal of duplicated corporate expenses and other potential operational efficiencies; and

£2.1 million of additional non-recurring cost savings during the Transition Period as a result of a reduction in management fees payable to Custodian Capital;

A stronger and more resilient balance sheet enhancing the Combined Group's ability to grow and to address future refinancing events, with the expected retention of CREI's and API's existing debt facilities implying a pro forma LTV of approximately 30.2 per cent., a weighted average cost of debt of 5.0 per cent. and a weighted average debt maturity of 3.8 years for the Combined Group as at 31 December 2023. The aggregate debt portfolio of £225 million of fixed rate debt expiring between 2025 - 2032 and the £125 million of revolving credit facilities will allow for the ongoing financing of the Combined Group in the long and short term;

Continued commitment to paying a fully covered dividend, in line with CREI's existing policy and practice since IPO, which is expected to result in an uplift in annual dividends payable to API Shareholders, with an objective of growing the dividend on a sustainable basis;

Creation of an enlarged REIT with an enhanced market profile, a broader appeal to investors, greater share liquidity, and the scale to support a larger weighting in key indices with potential for inclusion in the FTSE 250 Index in due course;

Diversification of the shareholder register of the Combined Group with a broad mix of private and institutional investors, while enabling mutual shareholders to consolidate their holdings across the two companies; and

Continued focus on corporate governance, with the CREI Board benefiting from the added expertise of certain API Directors and the transition to a fully independent board following the integration of the two companies.

The Combined Group's pro forma sector weighting by ERV as at 31 December 2023 is shown below:

 

 

 

 

	Weighting by ERV (as at 31 December 2023)
Sector	CREI	API	Combined Group
Industrial	41%	48%	44%
Office	16%	25%	20%
Retail warehousing	22%	11%	18%
Other(*)	13%	12%	12%
High street retail	8%	4%	6%

^{(*) 'Other' sectors include: (i) in respect of the CREI portfolio, pubs and restaurants, gyms, drive-throughs, motor trade, leisure and trade counter; and (ii) in respect of the API portfolio, leisure, data centres, student housing, hotels (and apart-hotels) and healthcare.}

The Combined Group's pro forma weighting by tenant quality as at 31 December 2023 is shown below:

	Weighting by ERV (as at 31 December 2023)
Experian risk rating	CREI	API	Combined Group
Government	2%	9%	5%
Very low risk	57%	51%	54%
Low risk	8%	14%	10%
Below average risk	13%	10%	12%
Above average risk	8%	5%	7%
High risk	2%	1%	2%
Other	11%	9%	10%

 

Quantified Financial Benefits Statement

 

The CREI Directors, having reviewed and analysed the potential cost savings of the Combined Group, as well as taking into account factors they can influence, believe the Combined Group can deliver shareholder value through the expected realisation of approximately:

£1.0 million of pre-tax recurring run-rate cost synergies by the end of the first year following the Effective Date (the "Recurring Cost Synergies"); and

£2.1 million of additional non-recurring pre-tax cost synergies during the Transition Period (the "Transition Period Cost Synergies").

The Recurring Cost Synergies are expected to be realised principally from:

Management fees: unification of investment management under Custodian Capital, delivering an estimated £0.5 million of annualised run-rate cost synergies derived from lower management and administrative fees charged on the API investment properties (the "Management Fee Savings"); and

Corporate and administrative: rationalisation of duplicated listing, administration and operational expenses delivering at least an estimated £0.5 million of annualised run rate cost synergies.

 

The additional Transition Period Cost Synergies are expected to be realised principally from:

Amended management fee tiers: reduction in the management fees payable by CREI to Custodian Capital for the Transition Period delivering an estimated £0.3 million of annualised run rate cost synergies (£0.6 million total estimated cost synergies) through the consolidation of the first two fee tiers into one fee tier, such that the consolidated fee tier will be calculated as a fee of 0.75 per cent. in respect of the NAV of the Combined Group which is less than or equal to £500 million (rather than a fee of 0.90 per cent. in respect of NAV up to £200 million and 0.75 per cent. up to £500 million) (the "Amended Management Fee Tier Savings"); and

Partial management fee waiver: Custodian Capital has agreed to waive its management fee in relation to the NAV attributable to the API portfolio for the first nine months following completion of the Merger (the "Partial Management Fee Waiver Savings") delivering an estimated £1.5 million of cost synergies in the first year following the Effective Date.

 

In order to achieve the Management Fee Savings, the Amended Management Fee Tier Savings and the Partial Management Fee Waiver Savings, it is estimated that API will incur one-off costs of between £1.5 million and £2.0 million in connection with the termination of the API Investment Management Agreement. These costs will be incurred within the first year following the Effective Date and have been reflected as a cost to API within the Exchange Ratio. The CREI Directors expect that any costs incurred in the realisation of the other cost synergies will be immaterial.

Other potential adverse effects of the Merger have been considered and were determined by the CREI Directors to be immaterial for the analysis.

The identified cost savings will accrue as a direct result of the Merger and would not be achieved on a standalone basis.

These statements relating to identified cost savings and estimated savings relate to future actions or circumstances which by their nature involve risks, uncertainties and contingencies. As a consequence, the identified synergies and estimated savings referred to may not be achieved, may be achieved later or sooner than estimated, or those achieved could be materially different from those estimated.

Further information on the bases of belief supporting the Quantified Financial Benefits Statement, including the principal assumptions and sources of information, is set out in Appendix 5 to this Announcement.

board RecommendationS

The API Directors, who have been so advised by Lazard as to the financial terms of the Merger, consider the terms of the Merger to be fair and reasonable. In providing its advice to the API Directors, Lazard has taken into account the commercial assessments of the API Directors. Lazard is providing independent financial advice to the API Directors for the purposes of Rule 3 of the Takeover Code.

Accordingly, the API Directors intend to recommend unanimously that Scheme Shareholders vote in favour of the Scheme at the API Court Meeting (or, in the event that the Merger is implemented by a Takeover Offer, to accept such Takeover Offer) and that API Shareholders vote in favour of the API Resolution to be proposed at the API General Meeting as the API Directors have irrevocably undertaken to do in respect of their own beneficial holdings of, in aggregate, 295,092 API Shares, representing approximately 0.08 per cent. of the issued ordinary share capital of API on the Latest Practicable Date. 

In order to allot and issue the New CREI Shares, CREI will be required to seek the approval of CREI Shareholders of the CREI Resolution at the CREI General Meeting. The Merger is accordingly conditional on the approval of the CREI Shareholders of the CREI Resolution at the CREI General Meeting.

The CREI Directors consider the Merger to be in the best interests of CREI Shareholders as a whole and intend unanimously to recommend that CREI Shareholders vote in favour of the CREI Resolution to be proposed at the CREI General Meeting, as those CREI Directors, together with certain of Ian Mattioli's close relatives and related trusts, who hold CREI Shares have irrevocably undertaken to do in respect of their own holdings of, in aggregate, 6,204,817 CREI Shares, representing approximately 1.41 per cent. of the issued ordinary share capital of CREI on the Latest Practicable Date.

Background to, and Reasons for, the API directors' Recommendation

API has consistently sought to meet shareholders' objectives by investing in good quality assets that have the potential to provide an above market level of total return as well as an attractive level of income that has scope to grow. API has achieved this through successful capital rotation and active asset management resulting in an attractive portfolio, with industrial assets constituting 48% of the portfolio by ERV as at 31 December 2023.

Over the last 18 months, however, API along with other diversified investment trusts has had to contend with the significant challenges facing the real estate sector as a whole, with rising inflation leading to a substantial increase in interest rates to levels not seen since before the Global Financial Crisis. This in turn has impacted investor sentiment, real estate capital values, transaction volumes and equity market liquidity, notwithstanding operational robustness in many sub-sectors of the market, including those to which API has significant exposure.

In API's case, these challenges have been compounded by the relatively small scale of the company and in particular the need to refinance its debt facility (consisting of a term loan and revolving credit facility) in late 2022, ahead of the previous maturity date in April 2023, at a time when politically induced gilt market volatility was at its height. API currently pays an annualised dividend of 4 pence per share which is not covered by EPRA earnings, with cover of approximately 80% for the last reported quarter ended 30 September 2023. In recognition of these challenges, and the impact on API's share price and discount to EPRA NTA per share, the API Board elected to undertake a comprehensive review of API's strategic options in Q3 2023 with the objective of potentially delivering an uplift in value for API Shareholders, as well as increased share liquidity and an enhanced and fully covered dividend for API Shareholders.

Having assessed a wide range of potential strategic options in detail, the API Board believes that there is a strong strategic and financial rationale for a combination with CREI, noting in particular:

That based on the Closing Price per CREI Share, the exchange ratio represents a premium of approximately 29.4% to API's Closing Price, 23.0% to API's 1-month volume-weighted average price and 26.5% to API's 3-month volume-weighted average price as at the Latest Practicable Date;

API Shareholders are expected to experience an annualised uplift in dividends of 7.3% (based on the Exchange Ratio and CREI's target dividend of 5.5 pence per share) with the dividend being fully covered;

CREI's and API's shared income-focused approach to investing in diversified UK commercial property, the complementary nature of their two portfolios, similar sectoral weightings and sustainability credentials;

The enhanced capital structure of the Combined Group and its superior ability to address future refinancing events as a consequence;

The opportunity for API Shareholders to remain invested, with ongoing exposure to API's attractive portfolio and its growth prospects through holding shares in the Combined Group;

The superior valuation at which CREI's shares have historically traded relative to API's, with an average discount to EPRA NTA per share of approximately 11% over the last year, compared to approximately 37% for API, and approximately 10% over the last 3 years compared to approximately 29% for API;

The anticipated increase in share liquidity by virtue of the Combined Group's enhanced scale, potential index weightings and broader appeal to investors;

The strong track record of Custodian Capital, as demonstrated by CREI's total shareholder returns over time relative to peers; and

The commitment of the CREI Board to strong corporate governance, including through the appointment of two API Directors and the transition to a fully independent board following the integration of the two companies.

In summary, the API Board is firmly of the view that a combination with CREI represents an attractive opportunity for API Shareholders to benefit from a significant premium and enhanced share liquidity and dividend income through continued investment in a differentiated REIT of improved scale.

Accordingly, following careful consideration, the API Directors unanimously intend to recommend the Merger to API Shareholders.

Background to, and Reasons for, the CREI DIRECTORS' Recommendation

The CREI Board believes there is a compelling strategic and financial rationale for the Merger. The CREI Board views API's portfolio as complementary to the CREI portfolio based on API's similar property strategy and CREI's current sector and geographical weightings. The Merger will result in a substantially larger portfolio generating the scale to support a larger weighting in key indices and broaden appeal to investors.

CREI and API have both pursued an income-focused investment strategy, exploiting the mispricing of good secondary and smaller lot size properties to drive higher income returns, without adding property specific or concentration risk. The combined portfolio resulting from the Merger will support the strategies sought by shareholders on both registers in a larger, more liquid, and broadly diversified portfolio.

The Merger is expected to result in material cost savings, including a reduction in management fees (resulting in lower ongoing charges as a percentage of NTA), the removal of duplicated corporate expenses and other potential operational efficiencies, which together with CREI's progressive dividend policy, is expected to improve total shareholder returns. This transaction will further enhance the ability of the Combined Group to grow and address future refinancing events with a stronger and more resilient balance sheet.

Consequently, the CREI Board believes that the Merger is of benefit to the existing CREI Shareholders as it will grow and diversify the CREI portfolio while reducing key costs as a proportion of net asset value and driving total shareholder returns.

Accordingly, following careful consideration, the CREI Directors unanimously intend to recommend that CREI Shareholders vote in favour of the CREI Resolution at the CREI General Meeting.

Irrevocable undertakings and letter of intent

CREI has received irrevocable undertakings from each of the API Directors who are interested in API Shares to vote in favour of the Scheme at the Court Meeting and vote in favour of the API Resolution at the API General Meeting (or, in the event that the Merger is implemented by way of a Takeover Offer, to accept or procure acceptance of the Takeover Offer), in respect of, in aggregate 295,092 API Shares representing approximately 0.08 per cent. of the issued share capital of API as at the Latest Practicable Date.

CREI has also received a letter of intent to vote in favour of the Scheme at the Court Meeting and in favour of the API Resolution at the API General Meeting (or, in the event that the Merger is implemented by way of Takeover Offer, to accept or procure acceptance of the Takeover Offer), from Brooks Macdonald Asset Management in respect of 11,376,425 API Shares representing approximately 2.98 per cent. of the issued share capital of API as at the Latest Practicable Date.

In total, therefore, CREI has received irrevocable undertakings and a letter of intent, including those irrevocable undertakings from all API Directors, in respect of 11,671,517 API Shares in aggregate, representing approximately 3.06 per cent. of the issued ordinary share capital of API as at the Latest Practicable Date.

In connection with the CREI General Meeting, those CREI Directors, together with certain of Ian Mattioli's close relatives and related trusts, that hold CREI Shares have irrevocably undertaken to vote in favour of the CREI Resolution at the CREI General Meeting in respect of 6,204,817 CREI Shares in aggregate, representing approximately 1.41 per cent. of the issued ordinary share capital of CREI as at the Latest Practicable Date.

Further details of these irrevocable undertakings and letters of intent are set out in Appendix 3 to this Announcement.

INFORMATION ON crei

CREI, established in 2014, is a UK real estate investment trust with a portfolio comprising high quality properties predominantly let to institutional grade tenants throughout the UK, principally characterised by properties with individual values of less than £10 million at acquisition. CREI seeks to provide investors with an attractive level of income and the potential for capital growth from a portfolio with strong environmental credentials, striving to be the REIT of choice for private and institutional investors seeking high and stable dividends from well diversified UK real estate. In line with CREI's published growth strategy, its investment policy has been amended to specify that CREI is committed to seeking further growth, which may involve strategic property portfolio acquisitions and corporate consolidation, such transactions potentially including public and private companies, holding companies and special purpose vehicles.

CREI's portfolio was valued at £602 million as at 31 December 2023 with an EPRA Topped-Up Net Initial Yield of 6.2%, a reversionary yield of 7.8%, a 41% weighting by ERV to industrial assets and Rolled-Forward Unaudited EPRA NTA of £413 million or 93.7 pence per CREI share. As at the Latest Practicable Date, CREI had a market capitalisation of £351 million. CREI is externally managed by Custodian Capital, a property management and investment business which is regulated by the FCA.

A fundamental element of CREI's strategy is to target smaller sized properties, principally characterised by properties with individual values of less than £10 million at acquisition, to capture the yield advantage available relative to larger sized properties. In the period from 2010 - 2023, data sourced from PropertyData⁽²⁾ shows that there is a transaction yield advantage of approximately 150 basis points between properties with individual values below £10 million versus properties with individual values above £10 million, compared to a yield advantage of approximately 60 basis points between 2000 - 2010. The CREI Board believes that this implied increase in yield differential since 2010 is not entirely reflective of a rise in risk associated with smaller properties but also due to a change in the supply and demand dynamics in the market. The CREI Board believes these dynamics are principally because of an increase in strategies that pursue larger sized properties, which has resulted in a reduction in the associated yields, which has coincided with those same investors reducing their exposure to smaller sized properties and thus increasing the supply of such assets and associated yields.

Custodian Capital is a wholly-owned subsidiary of Mattioli Woods, the specialist wealth management and employee benefits business, with in excess of £15 billion of assets under management, administration or advice. CREI entered the UK REIT regime on 27 March 2014. As a consequence of CREI continuing to be a REIT and meeting the relevant conditions, it should not be subject to UK corporation tax on the profits (income and capital gains) derived from its investment in its property portfolio and while CREI remains within the UK REIT regime, the disposal of any properties currently held by it and used within its property rental business should continue to be tax exempt.

^{(2) Average transaction yields between Q1 2010 - Q1 2023 as per PropertyData.}

Information on API

API, established in 2003, is a UK real estate investment trust investing in a diversified portfolio of UK commercial properties in the industrial, office, retail and "other" sectors with the objective of providing shareholders with an attractive level of income together with the prospect of income and capital growth.

API's portfolio was valued at £439 million as at 31 December 2023 with an EPRA Topped-Up Net Initial Yield of 5.4%, a reversionary yield of 7.3%, a 48% weighting by ERV to industrial assets and Rolled-Forward Unaudited EPRA NTA of £299 million or 78.5 pence per API share. As at the Latest Practicable Date, API had a market capitalisation of £183 million.

intentions for the combined Group

Property strategy

With effect from completion of the Merger, Custodian Capital will provide investment management, administrative and advisory services to the Combined Group. Custodian Capital expects to continue each company's ongoing programme of asset disposals, subject to prevailing sector specific market conditions at the time of such disposals, to fund ongoing capital expenditure programmes and reduce the quantum of variable rate debt in the Combined Group. Ongoing capital expenditure is essential to the rental performance of the portfolio of the Combined Group and will be prioritised over new acquisitions, in part to meet target environmental commitments.

Board composition and governance arrangements

Following completion of the Merger, it is expected that Jill May and Sarah Slater will join the CREI Board as non-executive directors. The CREI Board believes that these appointments will deliver an appropriately balanced board, with the complementary experience and skills necessary to drive the Combined Group forward following the Merger and to provide good continuity for API Shareholders. Post-Merger, the CREI Board will therefore comprise: David MacLellan, Elizabeth McMeikan, Hazel Adam, Malcolm Cooper, Chris Ireland, Ian Mattioli MBE, Jill May and Sarah Slater.  

Following the integration of the API portfolio, the CREI Board expects to conduct a review of its succession plan, assessing its composition and size to ensure an appropriate combination of skills, experience, diversity and knowledge.

As part of that review, Ian Mattioli MBE has informed the CREI Board of his intention to retire as a director of CREI at the annual general meeting prior to the conclusion of the Transition Period, which will result in a fully independent board. The CREI Board values Ian Mattioli MBE as a founding director of CREI and a representative of individual private clients of Custodian Capital's parent company, Mattioli Woods (the "MW Clients"). The MW Clients currently represent approximately 65 per cent. of the CREI shareholder register by value⁽³⁾ and Ian's intention reflects the fact that this proportion is expected to reduce substantially as a consequence of the Merger. The CREI Board has high regard for Ian's insight and expertise, and it is expected that he will continue to serve a valuable role for CREI in his capacity as chair of Custodian Capital, Chief Executive Officer of Mattioli Woods and an ongoing representative of MW Clients, including attendance at board meetings as part of the senior management team of Custodian Capital. Ian Mattioli MBE and his family own 6.1 million CREI Shares (representing approximately 1.4 per cent. of the CREI shareholder register by value as at the Latest Practicable Date) and intend to remain long-term shareholders of the Combined Group.

CREI intends to delist API and to surrender API's registration as an authorised closed-ended collective investment scheme regulated by the GFSC following the Effective Date. Consequently, API will not require listed company governance structures and accordingly, it is intended that the API Directors will cease to be directors of API and its subsidiaries (as applicable) with effect from completion of the Merger.

As CREI intends to cancel API's admission to trading on the London Stock Exchange following completion of the Merger, certain functions which exist in relation to API's status as a publicly traded company will no longer be required or will be reduced in size, reflecting the new structure within the Combined Group.

^{(3) Based on shareholder registers as at 31 December 2023, shares held by Mattioli Woods on behalf of discretionary managed portfolios operated on behalf of its clients represented 3.5 per cent. and 6.4 per cent. of the CREI and API shareholder registers by value, respectively.}

Management and employees

The API Group does not have any employees and therefore does not operate any pension scheme, nor does it have any arrangements in place for any employee involvement in its capital. API has no place of business that will be affected by the Merger, fixed assets (other than its property portfolio), research and development function or headquarters. CREI has no intention to change these features of the API Group, or to introduce any management incentivisation arrangements for the Combined Group following completion of the Merger. It is expected that API's existing investment management agreement (which includes provisions for an orderly handover) will be terminated. 

Management arrangements and fees for the Combined Group

With effect from completion of the Merger, it has been agreed between CREI and Custodian Capital that:

·      Custodian Capital will waive its management fee in relation to the NAV attributable to API for the first nine months following completion of the Merger;

·      there will be a reduction in the management fees payable by CREI to Custodian Capital for the duration of the Transition Period. This will be implemented through the consolidation of the first two fee tiers into one fee tier, such that the consolidated fee tier will be calculated as a fee of 0.75 per cent. in respect of the NAV of the Combined Group which is less than or equal to £500 million (rather than a fee of 0.90 per cent. in respect of NAV up to £200 million and 0.75 per cent. up to £500 million);

·      in recognition of the waiver and reduction of fees, the CREI Board has agreed to an extension of the term of Custodian Capital's appointment as investment manager which will continue from the Effective Date with either party able to serve 12 months' written notice to terminate the management arrangements for the Combined Group, save that such notice may not be served prior to the conclusion of the Transition Period; and

·      in connection with Custodian Capital's additional work on the Merger, CREI shall pay Custodian Capital a one-off project fee of £350,000 (exclusive of VAT), which shall reduce to £75,000 (exclusive of VAT) if the Merger does not become Effective.

These changes are documented in the Amended and Restated Investment Management Agreement, the terms of which shall take effect from the Effective Date.

The CREI Board believes that the terms of the Amended and Restated Investment Management Agreement will promote management stability and ensure that Custodian Capital is appropriately incentivised to continue to invest in its capabilities for the benefit of the Combined Group. 

The entry by CREI into the Amended and Restated Investment Management Agreement falls within Listing Rule 11.1.10R (smaller related party transactions) and therefore CREI Shareholders are not required to approve these amendments. 

At the end of the Transition Period, the CREI Management Engagement Committee intends to conduct its regular review of the terms of Custodian Capital's appointment to ensure that the terms comply with market and industry practice and remain in the best interests of the shareholders of the Combined Group.

Listing and registered office

Following the Effective Date, CREI will remain listed on the Premium segment of the Official List and admitted to trading on the Main Market. The registered office of CREI will remain in Leicester.

REIT status

Both the CREI Group and the API Group fall within the UK REIT regime and benefit from the tax efficiencies provided by that regime. The Combined Group is expected to fall within the UK REIT regime and the relevant tax measures will continue to apply to the Combined Group.

Trading facilities

It is intended that dealings in, and registration of transfers of, API Shares (other than the registration of the transfer of the Scheme Shares to CREI pursuant to the Scheme) will be suspended shortly before the Effective Date at a time to be set out in the Scheme Document. It is further intended that applications will be made to the London Stock Exchange to cancel trading in the API Shares on the Main Market, and to the Financial Conduct Authority to cancel the listing of the API Shares on the Official List, in each case with effect from or shortly following the Effective Date. Further details about the de-listing and cancellation of trading of the API Shares can be found in paragraph 14 of this Announcement.

No statements in this paragraph 10 are "post-offer undertakings" for the purposes of Rule 19.5 of the Takeover Code.

Offer Related Arrangements

Confidentiality Agreement

On 10 July 2023, API and CREI entered into a confidentiality agreement in relation to the Merger (the "Confidentiality Agreement"), pursuant to which, amongst other things, CREI and API gave certain mutual undertakings to: (a) subject to certain exceptions, keep information relating to each other and the Merger confidential and not to disclose it to third parties; and (b) use such confidential information only in the consideration and evaluation of CREI's and API's respective businesses in relation to a possible acquisition of the entire issued and to be issued share capital of API, or of all or a material part of the assets or undertaking of API, or any transaction having substantially equivalent effect to the same (the "Purpose"). These confidentiality obligations will remain in force until the earlier of 24 months from 10 July 2023 and completion of any transaction within the meaning of the Purpose, which would include the Merger. In the Confidentiality Agreement, CREI and API also give customary standstill undertakings in relation to each of themselves and their concert parties, all of which cease to apply upon the release of this Announcement.

Dividends

 

Expected timetable for the Merger

 

The boards of CREI and API will retain their current dividend policies for the period to the Effective Date.

 

CREI and API have agreed that:

·      API Shareholders will be entitled to receive and retain a quarterly final dividend of up to 1.0 penny per API Share in respect of the quarter ended 31 December 2023 (the "API Q4 Dividend"); and

·      CREI Shareholders will be entitled to receive and retain a quarterly interim dividend of up to 1.375 pence per CREI Share in respect of the quarter ended 31 December 2023 (the "CREI Q3 Dividend").

 

The API Q4 Dividend and the CREI Q3 Dividend will each be declared on, and paid by reference to, a date falling prior to the Effective Date, consistent with their respective past practices as to timing and amount of such dividends. Payment of the API Q4 Dividend and the CREI Q3 Dividend is expected to occur in late February 2024. Further announcements will be made by the boards of CREI and API in due course.

 

It is currently expected that the Merger will become Effective in early April 2024. The New CREI Shares will be issued credited as fully paid-up and will rank pari passu in all respects with the CREI Shares in issue at the time the New CREI Shares are issued, including the right to receive and retain dividends and other distributions declared, made or paid by reference to a record date on or after the Effective Date. Accordingly, based on the expected timetable for the Merger to become Effective, Scheme Shareholders, assuming the Scheme Shareholder has retained their New CREI Shares, would receive the quarterly final dividend to be declared by CREI in respect of the quarter ended 31 March 2024 (the "CREI Q4 Dividend").

 

Delay to the expected timetable for the Merger

 

If, however, the timetable for the Merger is delayed such that the Merger will become Effective after the expected date (but prior to the Long Stop Date), CREI and API have agreed that API Shareholders will be entitled to receive and retain any quarterly interim dividend declared by API in respect of the quarter ended 31 March 2024 (the "API Q1 Dividend") and CREI Shareholders will be entitled to receive and retain any CREI Q4 Dividend declared by CREI, in each case, to be declared consistent with their respective past practices as to timing and amount of such dividends.

 

Amendments to the Exchange Ratio

The Exchange Ratio will be adjusted:

(a)   in the event that either CREI or API announces, declares, makes or pays any one or more dividends or other distributions prior to the Merger becoming Effective that is or are, in aggregate, in excess of: (i) 1.375 pence per CREI Share in respect of the CREI Q3 Dividend and, if the ex dividend date falls prior to the Merger becoming Effective, 1.375 pence per CREI Share in respect of the CREI Q4 Dividend; or (ii) 1.0 penny per API Share in respect of the API Q4 Dividend and, if the ex-dividend date falls prior to the Merger becoming Effective, 1.0 penny per API Share in respect of the API Q1 Dividend (the amount of such excess in each case being the "Excess"), in which event the adjustment to the Exchange Ratio shall be to take account of the Excess; and/or

(b)   in the event that (i) the API Q1 Dividend is not covered by the income earned in the relevant quarter (the "API Q1 Uncovered Dividend Portion"), or (ii) the CREI Q4 Dividend is not covered by the income earned in the relevant quarter (the "CREI Q4 Uncovered Dividend Portion"), in which event the adjustment to the Exchange Ratio shall be to take account of the API Q1 Uncovered Dividend Portion and/or the CREI Q4 Uncovered Dividend Portion; and/or

(c)   if, at the time of completion of the Merger, either CREI or API has announced, declared, made or paid the CREI Q4 Dividend or the API Q1 Dividend, respectively, but the other has not announced, declared, made or paid its corresponding dividend (a "Dividend Discrepancy"), in which case the adjustment to the Exchange Ratio shall be to take account of the Dividend Discrepancy.

 

In the event that any adjustment to the Exchange Ratio is required pursuant to (a), (b) and/or (c) above, such adjustment will be made by reference to the relevant Rolled-Forward Unaudited EPRA NTA(s) as at 31 December 2023. Any adjustment to the Exchange Ratio shall be the subject of an announcement and, for the avoidance of doubt, shall not be regarded as constituting any revision or variation of the terms of the Scheme or the Merger. To the extent that a dividend or distribution has been declared but not paid prior to the Effective Date, and such dividend or distribution is cancelled, then the Exchange Ratio shall not be subject to change in accordance with this paragraph.

Following completion of the Merger, the Combined Group intends to focus on maintaining CREI's dividend yield and dividend cover going forward. On the basis of market conditions as at the date of this Announcement, CREI is targeting a dividend per share of at least 5.5 pence per CREI Share for the year ending 31 March 2024, and CREI's aim is to grow its dividend on a sustainable basis as earnings grow through capturing the available rental growth in the combined portfolio's reversionary potential. 

The dividends referred to above are not intended as a profit forecast or estimate for CREI or API for any period and no statement in this Announcement should be interpreted to mean that earnings or earnings per CREI Share or per API Share for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per CREI Share or per API Share.

Scheme Process

It is intended that the Merger will be effected by means of a Court-sanctioned scheme of arrangement between API and the Scheme Shareholders under Part VIII of the Companies Law, further details of which are contained in this Announcement and full details of which will be set out in the Scheme Document to be published by API in due course. The procedure involves, among other things, an application by API to the Court to sanction the Scheme, in consideration for which Scheme Shareholders who are on the register of members at the Scheme Record Time will receive the New CREI Shares on the basis of the Exchange Ratio as set out in paragraph 1 above. The purpose of the Scheme is to provide for CREI to become the holder of the entire issued ordinary share capital of API.

The New CREI Shares will be issued in registered form, credited as fully paid, and will be capable of being held in both certificated and uncertificated form. They will rank pari passu in all respects with the existing CREI Shares, including the rights to receive all dividends and other distributions (if any) declared, paid or made by CREI by reference to a record date falling after the Effective Date.

Fractions of New CREI Shares will not be allotted or issued pursuant to the Scheme and entitlements of Scheme Shareholders will be rounded down to the nearest whole number of New CREI Shares. All fractional entitlements to New CREI Shares will be aggregated and sold in the market as soon as practicable after the Effective Date. The net proceeds of such sale (after deduction of all expenses and commissions incurred in connection with the sale) will be distributed by CREI in due proportions to Scheme Shareholders who would otherwise have been entitled to such fractions, save that individual entitlements to amounts of less than £5 will be retained for the benefit of the Combined Group. 

The Merger will be subject to the Conditions and the further terms referred to in Appendix 1 to this Announcement and the full terms and conditions to be set out in the Scheme Document, and will only become Effective if, among other things, the following events occur on or before 11:59 p.m. (London time) on the Long Stop Date (or such later date as CREI and API may, with the consent of the Panel, agree and, if required, the Court may allow):

approval of the Scheme by a majority in number of the Scheme Shareholders who are present and voting (and entitled to vote), either in person or by proxy, at the API Court Meeting or at any adjournment thereof and who represent not less than 75 per cent. of the voting rights of such Scheme Shareholders;

the API Resolution is passed at the API General Meeting or at any adjournment thereof by the requisite majority of votes validly cast on the API Resolution, whether in person or by proxy;

the CREI Resolution is passed at the CREI General Meeting or at any adjournment thereof by the requisite majority;

the FCA having acknowledged to CREI or its agent (and such acknowledgement not having been withdrawn) that the application for the admission of the New CREI Shares to the Official List with a Premium segment listing has been approved and (after satisfaction of any conditions to which such approval is expressed to be subject) will become effective as soon as a dealing notice has been issued by the FCA and any listing conditions having been satisfied;

the London Stock Exchange having acknowledged to CREI or its agent (and such acknowledgement not having been withdrawn) that the New CREI Shares will be admitted to trading on the Main Market; 

following the API Meetings, the Scheme is sanctioned by the Court (without modification, or with modification on terms agreed by CREI and API); and

the Scheme becoming Effective by no later than 11.59 p.m. on the Long Stop Date.

The Scheme will become Effective at the time and date to be stated in the Scheme Court Order. Upon the Scheme becoming Effective: (i) it will be binding on all Scheme Shareholders, irrespective of whether or not they attended or voted at the API Meetings (and if they attended and voted, whether or not they voted in favour); and (ii) share certificates in respect of API Shares will cease to be valid and entitlements to API Shares held within the CREST system will be cancelled.

The API Resolution to be proposed at the API General Meeting will, amongst other matters, provide that the Articles be amended to incorporate provisions requiring any API Shares issued after the Scheme Record Time (other than to CREI and/or its nominees) to be automatically transferred to CREI on the same terms as the Merger (other than terms as to timings and formalities). The provisions of the Articles (as amended) will avoid any person (other than CREI and its nominees) holding API Shares after the Effective Date.

The Scheme will lapse and the Merger will not take place if:

either the API Court Meeting or the API General Meeting are not held on or before the 22nd day after the expected date of such API Meetings, to be set out in the Scheme Document in due course (or such later date as may be agreed between CREI and API with the consent of the Panel (and that the Court may allow if required));

the Sanction Hearing is not held on or before the 22nd day after the expected date of the Sanction Hearing, to be set out in the Scheme Document in due course (or such later date as may be agreed between CREI and API with the consent of the Panel (and that the Court may allow if required));  

the Scheme does not become Effective on or before 11:59 p.m. (London time) on the Long Stop Date,

provided, however, that the deadlines for the timing of the API Court Meeting, the API General Meeting and the Sanction Hearing, to be set out in the Scheme Document in due course, may be waived by CREI, and the Long Stop Date may be extended by agreement in writing between CREI and API (with the Panel's consent and as the Court may allow, if such consent and/or approval is/are required). If any of the dates and/or times in the Scheme Document change, the revised dates and/or times will be notified to API Shareholders by announcement through a Regulatory Information Service, with such announcement being made available on API's website at www.abrdnpit.co.uk.

The Scheme Document will include full details of the Scheme, together with notices of the API Court Meeting and the API General Meeting and the expected timetable, and will specify the action to be taken by Scheme Shareholders. It is expected that the Scheme Document, together with the Forms of Proxy, will be published as soon as practicable and in any event within 28 days of the date of this Announcement (or such later date as may be agreed by CREI and API with the consent of the Panel).

Subject, amongst other things, to the satisfaction or waiver of the Conditions, it is expected that the Scheme will become Effective in early April 2024. The Scheme will be governed by Guernsey law and will be subject to the jurisdiction of the Court. The Scheme will be subject to the applicable requirements of the Takeover Code, the Panel, the London Stock Exchange and the FCA.

CREI has reserved the right to elect, subject to the consent of the Panel, for the Merger to be implemented by way of a Takeover Offer. In this event, the Takeover Offer will be implemented on the same terms, so far as applicable, as those which would apply to the Scheme. If CREI does elect to implement the Merger by way of a Takeover Offer, and if sufficient acceptances of such Takeover Offer are received and/or sufficient API Shares are otherwise acquired, it is the intention of CREI to apply the provisions of Part XVIII of the Companies Law to acquire compulsorily any outstanding API Shares to which such Merger relates.

Delisting OF API SHARES

Prior to the Scheme becoming Effective, it is intended that API will make an application to the FCA for the cancellation of the listing of API Shares on the Official List, and to the London Stock Exchange to cancel the admission to trading of the API Shares on the Main Market, in each case to take effect from or shortly after the Effective Date.

It is expected that the last day of dealings in API Shares on the Main Market will be the Business Day immediately prior to the Sanction Hearing and no transfers will be registered after 6.00 p.m. (London time) on that date.

Following the Scheme becoming Effective. CREI (and/or its nominee(s)) will acquire the Scheme Shares fully paid and free from all liens, equitable interests, charges, encumbrances and other third party rights of any nature whatsoever and together with all rights attaching to them including the right to receive and retain all dividends and distributions (if any) declared after the Effective Date.

Admission of, and commencement of dealings in, the New CREI Shares

Applications will be made to the FCA and to the London Stock Exchange, respectively, for the New CREI Shares to be issued in consideration for the Merger to be admitted to the premium listing segment of the Official list and to be admitted to trading on the Main Market.

It is expected that Admission will become effective and that unconditional dealings in the New CREI Shares will commence on the London Stock Exchange, at 8.00 a.m. (London time) on the first Business Day following the date on which the Scheme becomes Effective.

Details of how API Shareholders can hold, access and trade in CREI Shares will be set out in the Scheme Document. API Shareholders resident in the United Kingdom will be able to hold their CREI Shares through any of the ways currently available to CREI Shareholders, including through an intermediary of their own choice should they wish to do so.

CREI Shareholder Approval

The Merger will be conditional on, among other things, the CREI Resolution being passed by the requisite majority of CREI Shareholders at the CREI General Meeting.

CREI is required to publish a prospectus in connection with the admission of the New CREI Shares. Accordingly, CREI will prepare the Combined Circular and Prospectus which will contain a notice convening the CREI General Meeting and information relating to, amongst other things, the Combined Group and the New CREI Shares.

It is expected that the Combined Circular and Prospectus will be published and posted to CREI Shareholders at the same time as the Scheme Document is posted to API Shareholders. The Combined Circular and Prospectus will be made available by CREI on its website at www.custodianreit.com and by API on its website at www.abrdnpit.co.uk. API and CREI urge API Shareholders to read the Scheme Document and the Combined Circular and Prospectus carefully as each will contain important information relating to the Merger. API Shareholders are also advised to read the Combined Circular and Prospectus, as it will contain important information relating to the New CREI Shares. Any vote, decision in respect of or other response to the Merger (or the Scheme, if applicable) should only be made on the basis of the information contained in the Scheme Document and the Combined Circular and Prospectus.

Disclosure of Interests

Except for the irrevocable undertakings referred to in paragraph 7 above and save as otherwise disclosed in this Announcement, as at the close of business on the Latest Practicable Date, neither CREI nor any of the CREI Directors, nor, so far as CREI is aware, any person acting in concert (within the meaning of the Takeover Code) with CREI:

has any interest in, or right to subscribe for, any relevant securities of API; nor

has any short position in API Shares, including any short position under a derivative, any agreement to sell, any delivery obligation or right to require another person to purchase or take delivery of relevant securities of API; nor

has borrowed or lent any relevant securities of API or entered into any financial collateral arrangements relating to relevant securities of API; nor

is party to any dealing arrangement of the kind referred to in Note 11 on the definition of acting in concert in the Takeover Code in relation to relevant securities of API.

An "interest in" securities for these purposes arises, in summary, when a person has long economic exposure, whether absolute or conditional, to changes in the price of securities (and a person who only has a short position in securities is not treated as interested in those securities). In particular, a person will be treated as having an 'interest' by virtue of the ownership, voting rights or control of securities, or by virtue of any agreement to purchase, option in respect of, or derivative referenced to securities.

In the interests of secrecy prior to this Announcement, it has not been practicable for CREI to make enquiries of all of its concert parties in advance of the release of this Announcement. Therefore, if CREI becomes aware, following the making of such enquiries, that any of CREI's concert parties have any additional interests in relevant securities of API, all relevant details in respect of API's concert parties will be included CREI's Opening Position Disclosure in accordance with the Takeover Code.

Consents

Each of Deutsche Numis, Lazard and Winterflood has given and not withdrawn their consent to the publication of this Announcement with the inclusion herein of the references to their names in the form and context in which they appear.

RSM UK Corporate Finance LLP has given and not withdrawn its consent to the inclusion in this Announcement of its report on the Custodian Quantified Financial Benefits Statement, with the inclusion herein to the references to its name and, where applicable, report in the form and context in which it is included.

Each of Knight Frank and Savills has given and not withdrawn its consent to the publication of its valuation report(s) in this Announcement with the inclusion herein to the references to its name and, where applicable, report in the form and context in which it is included.

Documents published on a website

In accordance with Rule 26.2 of the Takeover Code, copies of the following documents will, to the extent not already published there, by no later than 12.00 noon on the Business Day following the date of this Announcement, be published on CREI's website at www.custodianreit.com and API's website at www.abrdnpit.co.uk during the Offer Period:

this Announcement;

the irrevocable undertakings and a letter of intent referred to in paragraph 7 above and summarised in Appendix 3 to this Announcement;

the Confidentiality Agreement referred to in paragraph 11 above;

the consent letters from each of Deutsche Numis, Lazard, Winterflood, Knight Frank and Savills referred to in paragraph 18 above;

the Knight Frank valuation report in respect of certain properties comprising the CREI portfolio as set out in Part A of Appendix 4 of this Announcement;

the Savills valuation report in respect of certain properties comprising the CREI portfolio as set out in Part B of Appendix 4 of this Announcement; and

the Knight Frank valuation report in respect of the API portfolio as set out in Part C of Appendix 4 of this Announcement.

The contents of CREI's website and API's website, and any website accessible from hyperlinks, are not incorporated into and do not form part of this Announcement.

General

Appendix 2 to this Announcement contains bases and sources of certain information contained in this Announcement. Details of irrevocable undertakings and the letter of intent received are set out in Appendix 3. Property valuation reports for CREI and API (each as at 31 December 2023) pursuant to Rule 29 of the Takeover Code are set out in Appendix 4. Certain terms used in this Announcement are defined in Appendix 6.

In the event that the assets within either CREI's or API's property portfolios were to be sold at the valuations contained in the valuation reports set out in Appendix 4 to this Announcement, any gains realised on such disposals may be subject to taxation in the UK and/or (in the case of API) Guernsey. 

Generally, disposals by a UK REIT of assets located in the UK held for the purpose of a property rental business should be exempt from UK corporation tax, however there are specific rules which can result in assets held as part of the property rental business being subject to tax on disposal, for example when a property is materially developed and sold within three years of completion of that development. In connection with the Merger it is not contemplated that the aforementioned liability to taxation will crystallise.

For the purposes of Rule 29.5 of the Takeover Code, the CREI Board confirms that each of Knight Frank and Savills has confirmed to it that an updated valuation of CREI's property portfolio as at the date of this Announcement would not be materially different from the valuation given by each of Knight Frank and Savills as at 31 December 2023 and contained in Knight Frank's and Savills' valuation reports respectively, set out in Appendix 4 to this Announcement.

For the purposes of Rule 29.5 of the Takeover Code, the API Board confirms that Knight Frank has confirmed to it that an updated valuation of API's property portfolio as at the date of this Announcement would not be materially different from the valuation given by Knight Frank as at 31 December 2023 and contained in Knight Frank's valuation report set out in Appendix 4 to this Announcement.

For the purposes of Rule 28 of the Takeover Code, the Quantified Financial Benefits Statement is the responsibility of CREI and the CREI Directors. Appendix 5 to this Announcement sets out the Quantified Financial Benefits Statement relating to cost savings and synergies arising out of the Merger and provides underlying information and bases of belief. Appendix 5 also includes reports from CREI's reporting accountant, RSM UK Corporate Finance LLP, and its financial adviser Deutsche Numis in connection with the Quantified Financial Benefits Statement, as required pursuant to Rule 28.1(a) of the Takeover Code, and provides underlying information and bases for the accountant's and advisers' respective reports.

This Announcement does not constitute an offer for sale of any securities or an invitation to purchase or subscribe for any securities. API Shareholders are advised to read carefully the Scheme Document and related Forms of Proxy once they have been dispatched.

A pre-recorded video briefing in relation to the Merger, presented by Richard Shepherd-Cross of Custodian Capital, is available on CREI's website at www.custodianreit.com.  

Enquiries

Custodian Property Income REIT plc (CREI) David MacLellan (Chair)	via Deutsche Numis
Deutsche Numis (Financial Adviser and Corporate Broker to CREI) Nathan Brown Stuart Ord Alexander Kladov George Shiel	+44 20 7260 1000‎
FTI Consulting (Financial PR Adviser to CREI) Richard Sunderland Andrew Davis Oliver Parsons	+44 20 3727 1000
abrdn Property Income Trust Limited (API) James Clifton-Brown (Chair)	via Winterflood
Lazard (Financial Adviser to API) Patrick Long Jolyon Coates	+44 20 7187 2000
Winterflood (Corporate Broker to API) Neil Langford	+44 20 3100 0160

Stephenson Harwood LLP is acting as English legal adviser to CREI in connection with the Merger.

Addleshaw Goddard LLP is acting as English legal adviser to API in connection with the Merger.

Important notices

Numis Securities Limited (which is trading for these purposes as Deutsche Numis) ("Deutsche Numis"), which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting exclusively for CREI and for no one else in connection with the Merger and/or any other matter referred to in this Announcement and will neither regard any other person as its client nor be responsible to anyone other than CREI for providing the protections afforded to its clients or for providing advice in connection with the Merger, the contents of this Announcement, or any other matters referred to in this Announcement. Neither Deutsche Numis nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct, indirect, consequential, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Deutsche Numis in connection with this Announcement, any statement or other matter or arrangement referred to herein or otherwise.

Lazard & Co., Limited ("Lazard"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively as financial adviser to API and no one else in connection with the matters set out in this Announcement and will not be responsible to anyone other than API for providing the protections afforded to clients of Lazard nor for providing advice in relation to the matters set out in this Announcement. Neither Lazard nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lazard in connection with this Announcement, any statement contained herein or otherwise.

Winterflood Securities Limited ("Winterflood"), which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting exclusively for API and no-one else in connection with the matters set out in this Announcement and will not be responsible to anyone other than API for providing the protections afforded to customers of Winterflood or for providing advice in relation to the matters set out in this Announcement. Neither Winterflood nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Winterflood in connection with this Announcement, any statement contained herein or otherwise.

Further information

This Announcement is for information purposes only and is not intended to and does not constitute, or form part of an offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to the Merger or otherwise, nor shall there be any sale, issuance or transfer of securities of API in any jurisdiction in contravention of applicable law. The Merger will be made solely pursuant to the terms of the Scheme Document (or, if the Merger is implemented by way of a Takeover Offer, the Offer Document), which will contain the full terms and conditions of the Merger, including details of how API Shareholders may vote in respect of the Merger. Any vote, approval, decision in respect of, or other response to, the Merger should be made only on the basis of the information contained in the Scheme Document and the Combined Circular and Prospectus (or any other document by which the Merger is made by way of a Takeover Offer).

CREI will prepare the Combined Circular and Prospectus, containing information on the New CREI Shares and the Combined Group. CREI and API urge API Shareholders to read the Scheme Document and the Combined Circular and Prospectus carefully when they become available because they will contain important information in relation to the Merger, the New CREI Shares and the Combined Group. 

The statements contained in this Announcement are made as at the date of this Announcement, unless some other time is specified in relation to them, and the release of this Announcement shall not give rise to any implication that there has been no change in the facts set out in this Announcement since such date. This Announcement does not constitute a prospectus or prospectus equivalent document.

No person should construe the contents of this Announcement as legal, financial or tax advice. If you are in any doubt about the contents of this Announcement or the action you should take, you are recommended to seek your own independent financial advice immediately from your stockbroker, bank manager, solicitor, accountant or from an independent financial adviser duly authorised under FSMA if you are resident in the United Kingdom, or another appropriately authorised independent financial adviser, if you are in a territory outside the United Kingdom.

Neither the GFSC nor the States of Guernsey take any responsibility for the financial soundness of API or for the correctness of any of the statements made or opinions expressed with regard to it.

Overseas Shareholders

This Announcement has been prepared for the purpose of complying with Guernsey law, English law, the Takeover Code, the Market Abuse Regulation, the Disclosure Guidance and Transparency Rules and the Listing Rules and information disclosed may not be the same as that which would have been disclosed if this Announcement had been prepared in accordance with the laws of jurisdictions outside the United Kingdom or Guernsey. Nothing in this Announcement should be relied on for any other purpose.

The release, publication or distribution of this Announcement in or into certain jurisdictions other than the United Kingdom or Guernsey may be restricted by the laws and/or regulations of those jurisdictions and therefore persons into whose possession this Announcement comes who are subject to the laws and/or regulations of any jurisdiction other than the United Kingdom or Guernsey should inform themselves about and observe any such applicable laws and/or regulations in their jurisdiction. In particular, the ability of persons who are not resident in the United Kingdom or Guernsey to vote their Scheme Shares or API Shares (as applicable) with respect to the Scheme at the API Court Meeting or the API Resolution at the API General Meeting, or to appoint another person as proxy to vote at the API Court Meeting or the API General Meeting on their behalf, may be affected by the laws of the relevant jurisdiction in which they are located. Further details in relation to Overseas Shareholders will be contained in the Scheme Document. Any failure to comply with any such restrictions may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law, the companies and persons involved in the Merger disclaim any responsibility or liability for the violation of such restrictions by any person.

Unless otherwise determined by CREI or required by the Takeover Code, and permitted by applicable law and regulation, the Merger will not be made available, in whole or in part, directly or indirectly, in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction and no person may vote in favour of the Merger by any such use, means, instrumentality or from within a Restricted Jurisdiction or any other jurisdiction if to do so would constitute a violation of the laws of that jurisdiction. Copies of this Announcement and any formal documentation relating to the Merger are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in or into or from any Restricted Jurisdiction and persons receiving such documents (including custodians, nominees and trustees) must not mail or otherwise forward, distribute or send them in or into or from any Restricted Jurisdiction. Doing so may render invalid any related purported vote in respect of the Merger. If the Merger is implemented by way of a Takeover Offer (unless otherwise permitted by applicable law and regulation), the Takeover Offer may not be made directly or indirectly, in or into, or by the use of mails or any means or instrumentality (including, but not limited to, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or of any facility of a national, state or other securities exchange of any Restricted Jurisdiction and the Takeover Offer may not be capable of acceptance by any such use, means, instrumentality or facilities.

Further details in relation to Overseas Shareholders will be contained in the Scheme Document.

Forward-looking statements

This Announcement (including information incorporated by reference into this Announcement), oral statements made regarding the Merger, and other information published by CREI and API contain statements about CREI, API and/or the Combined Group that are or may be deemed to be "forward-looking statements". All statements other than statements of historical facts included in this Announcement, may be forward-looking statements. Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of CREI and API about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements.

 

The forward-looking statements contained in this Announcement include statements relating to the expected effects of the Merger on CREI and API, the expected timing and scope of the Merger and other statements other than historical facts. Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as "plans", "expects" or "does not expect", "is expected", "is subject to", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Forward looking statements include statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; and (ii) business and management strategies and the expansion and growth of CREI's or API's or the Combined Group's operations and potential synergies resulting from the Merger.

Although CREI and API believe that the expectations reflected in such forward-looking statements are reasonable, neither CREI nor API can give assurance that such expectations will prove to be correct. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future.

There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These factors include, but are not limited to: the ability to complete the Merger; the ability to obtain requisite regulatory and shareholder approvals and the satisfaction of other Conditions on the proposed terms; changes in the global political, economic, business and competitive environments and in market and regulatory forces; changes in future exchange and interest rates; changes in tax rates; future business combinations or disposals; changes in general economic and business conditions; changes in the behaviour of other market participants; the anticipated benefits from the Merger not being realised as a result of changes in general economic and market conditions in the countries in which CREI and API operate; weak, volatile or illiquid capital and/or credit markets; changes in the degree of competition in the geographic and business areas in which CREI and API operate; and changes in laws or in supervisory expectations or requirements. Other unknown or unpredictable factors could cause actual results to differ materially from those expected, estimated or projected in the forward-looking statements. If any one or more of these risks or uncertainties materialises or if any one or more of the assumptions proves incorrect, actual results may differ materially from those expected, estimated or projected. Such forward-looking statements should therefore be construed in the light of such factors.

Neither CREI nor API, nor any of their respective associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this Announcement will actually occur. Given the risks and uncertainties, you are cautioned not to place any reliance on these forward-looking statements. Other than in accordance with their legal or regulatory obligations, neither CREI nor API is under any obligation, and each of CREI and API expressly disclaim any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Disclosure requirements of the Takeover Code

Under Rule 8.3(a) of the Takeover Code, any person who is interested in 1 per cent. or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 p.m. (London time) on the 10th Business Day following the commencement of the offer period and, if appropriate, by no later than 3.30 p.m. (London time) on the 10^th Business Day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 p.m. (London time) on the Business Day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Quantified Financial Benefits Statement

Statements of estimated cost savings and synergies relate to future actions and circumstances which, by their nature, involve risks, uncertainties and contingencies. As a result, the cost savings and synergies referred to may not be achieved, may be achieved later or sooner than estimated, or those achieved could be materially different from those estimated. Neither the Quantified Financial Benefits Statement nor any other statement in this Announcement should be construed as a profit forecast or interpreted to mean that the Combined Group's earnings in the first full year following the Effective Date, or in any subsequent period, would necessarily match or be greater than or be less than those of CREI or API for the relevant preceding financial period or any other period. For the purposes of Rule 28 of the Takeover Code, the Quantified Financial Benefits Statement contained in this Announcement is the responsibility of CREI and the CREI Directors.

 

No profit forecasts or estimates

No statement in this Announcement is intended as a profit forecast or profit estimate for any period and no statement in this Announcement should be interpreted to mean that earnings or earnings per share for CREI or API for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share for CREI or API.

Rounding

Certain figures included in this Announcement have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

Publication on a website

In accordance with Rule 26.1 of the Takeover Code, a copy of this Announcement will be made available, subject to certain restrictions relating to persons resident in Restricted Jurisdictions, on CREI's website at www.custodianreit.com and API's website at www.abrdnpit.co.uk by no later than 12 noon (London time) on the first Business Day following the date of this Announcement.

For the avoidance of doubt, neither the contents of these websites nor the contents of any websites accessible from any hyperlinks is incorporated into or forms part of this Announcement.

Requesting hard copy documents

In accordance with Rule 30.3 of the Takeover Code, API Shareholders may request a hard copy of this Announcement (and any information incorporated by reference in this Announcement), free of charge, by contacting Northern Trust during business hours on 01481 745001 (from within the United Kingdom) and +44 (0) 1481 745001 (from outside the United Kingdom) or by submitting a request in writing to The Company Secretary, at team_api@ntrs.com. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines will be open between 9.00 a.m. to 5.30 p.m., Monday to Friday excluding public holidays in England and Wales.

For persons who receive a copy of this Announcement in electronic form or via a website notification, a hard copy of this Announcement will not be sent unless so requested. Such persons may also request that all future documents, announcements and information to be sent to them in relation to the Merger should be in hard copy form.

Scheme Process

In accordance with Section 5 of Appendix 7 of the Takeover Code, API will announce through a Regulatory Information Service key events in the Scheme process including the outcomes of the API Meetings and the Sanction Hearing.

Unless otherwise consented to by the Court and the Panel, any modification or revision to the Scheme will be made no later than the date which is 14 days prior to the API Meetings (or any later date to which such meetings are adjourned). In accordance with Section 11 of Appendix 7 of the Takeover Code, if the Scheme lapses or is withdrawn all documents of title and other documents lodged will be returned as soon as practicable and in any event within 14 days of such lapsing or withdrawal.

Information relating to API Shareholders

Please be aware that addresses, electronic addresses and certain other information provided by API Shareholders, persons with information rights and other relevant persons for the receipt of communications from API may be provided to CREI during the Offer Period as required under Section 4 of Appendix 4 to the Takeover Code to comply with Rule 2.11(c) of the Takeover Code.

Rule 2.9 of the Takeover Code

For the purposes of Rule 2.9 of the Takeover Code, CREI confirms that, as at the close of business on the Latest Practicable Date, it had in issue 440,850,398 ordinary shares of one penny which carry voting rights of one vote per share and are admitted to trading on the London Stock Exchange with ISIN GB00BJFLFT45.

For the purposes of Rule 2.9 of the Takeover Code, API confirms that, as at the close of business on the Latest Practicable Date, it had in issue 381,218,977 ordinary shares of one penny each (excluding any shares held in treasury) which carry voting rights of one vote per share and are admitted to trading on the London Stock Exchange with ISIN GB0033875286.