The proposed S$1.4 billion merger, which will be effected by way of a trust scheme of arrangement, will see ESR-REIT acquiring all of Ara Logos Trust's units in exchange for a combination of cash and new units [1].
One of the main concerns is the potential conflict of interest that may arise from both REITs having overlapping mandates in terms of asset pipeline, tenants, and operational network, as well as financial resources, given they have the same sponsor. This may cause competition for new assets and financial resources from the group [2].
However, some analysts see more merits from the REITs merging than on a standalone basis [3]. The backstop, which gives certainty to the issuer and acts as a form of insurance to unitholders, is another factor that may alleviate concerns regarding the merger.
[1] BT Explains: What you need to know about the ALog Trust-ESR-Reit merger
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