F&C bids to halt merger and keep contract for property trust

Stephen Peters, head of investment trusts at Charles Stanley, who owns a small interest in FCPT, expects the deal to go through although he says there is a chance shareholders could block the deal. He said: 'UK Commercial Property is more benchmark aware than F&C Commercial Property and therefore relative performance is less strong. If shareholders decide they want to keep the more active portfolio the deal is likely to fall through.'  

Under the arrangement FCPT shareholders will receive new UKCPT shares with an aggregate NAV equal to that of FCPT. Alternatively they can cash in at 91p per FCPT share. The merged entity would become the sixth largest UK-listed property company with a market capitalisation of £1.6 billion.

The deal will see a reduction in the total expense ratio to 0.7% per annum. This will be achieved in large through a reduction in management fees payable to Ignis.  

The FCPT and UKCPT boards see a number of benefits from joining forces. These include the ability to diversify further the property and tenant exposure and provide complimentary geographic and sector exposures without incurring material acquisition costs.

F&C will lose the management contract to Ignis following the merger and the latter has agreed to meet any compensation due to F&C in respect to the outstanding six month notice period.    

F&C commercial Property trust was trading at a 1.3% premium on 9 June 2010. Over the past three years its portfolio has returned -23.45% compared to the -41.41% of the MSCI/ACWI Real Estate index. The UK Commercial Property Trust is trading at a premium of 1.7%. It has lost 8.53% over three years compared to the 41.41% loss of the index. It has however been more less highly geared.