Brookfield, a significant player in the investment sector, has outmaneuvered competitor Segro by proposing a £557 million acquisition of Tritax EuroBox, a warehouse landlord.
This new bid translates to 69p in cash for each EuroBox share, surpassing Segro’s prior all-share offer of 68.4p, which had an estimated value of £552 million when initially presented last month. However, as Segro’s stock price decreased, its proposal’s worth dropped to around £525 million.
Tritax EuroBox, which manages a portfolio of warehouses valued at £1.2 billion, predominantly located in the Netherlands and Germany, had initially endorsed Segro’s bid. Nevertheless, the board has now shifted its support to Brookfield’s more lucrative all-cash proposition.
Industry analysts had speculated that Brookfield might improve its bid, although many believed Segro was in a strong position to dominate the negotiations. One fund manager expressed surprise at Brookfield’s successful bid, noting that when accounting for debt, the overall valuation of EuroBox stands at £1.1 billion.
Segro, which boasts a portfolio worth nearly £20 billion that includes warehouses, data centers, and delivery sites across Europe, has yet to indicate whether they will enhance their offer. They merely acknowledged the competing proposal and indicated further communication would follow if deemed necessary.
Market indicators suggest an expectation of a potential counteroffer from Segro, as EuroBox shares increased by 1.9p, or 2.8 percent, reaching 71p on Thursday, slightly above Brookfield’s offer.
Brookfield, which holds a 50 percent stake in the Canary Wharf Group, noted its long-standing interest in EuroBox, stating that discussions had been ongoing for several months before Segro entered the scene in early September.
Brad Hyler, Brookfield’s head of real estate in Europe, remarked, “Tritax EuroBox possesses a high-quality collection of logistics properties in key locations throughout Europe. These assets will complement our existing portfolio, allowing us to leverage capital, foster new relationships with tenants, and promote the overall growth of our platform.”
Robert Orr, chairman of EuroBox, stated the board’s decision to endorse Brookfield’s offer reflects its premium over Segro’s bid, ensuring shareholders receive a substantial benefit above the current valuation of their investment.
Furthermore, as Brookfield’s offer comprises cash, it grants EuroBox shareholders the flexibility to reinvest as they choose.
Despite Brookfield’s higher bid compared to Segro’s, and above EuroBox’s share price prior to the interest from either party, it is still 12 percent lower than EuroBox’s calculated net asset value per share.
This indicates that should the acquisition proceed, Brookfield will be acquiring EuroBox’s portfolio at a valuation that is 12 percent beneath the latest independent assessment.
This valuation discount reflects prevailing uncertainties in the commercial property market, where even warehouses, which previously outperformed many segments, have seen values decline by approximately 25 percent over recent years.
However, there is an emerging sentiment within the industry that property values are stabilizing, especially as interest rates show signs of decline. David Sleath, CEO of Segro, observed that the lowest point of the two-year downturn in commercial property occurred earlier this year, when he raised an additional £900 million from investors.