LondonMetric Property PLC on Friday said it has agreed to acquire Urban Logistics REIT PLC in a cash-and-share deal worth approximately £698.9 million, as it doubles down on its bet that urban warehousing will drive rental growth in the UK real estate market.
Urban Logistics is a UK-focused logistics real estate investment trust, while LondonMetric is a FTSE 100-listed real estate investment trust.
Under the terms of the agreement, each Urban Logistics shareholder will receive 0.5612 new LondonMetric shares and 42.8 pence in cash, valuing each Urban Logistics share at 150.3p. The offer represents a 21.8% premium to Urban Logistics’ closing price of 123.4p on April 2, the day before the target revealed it had received an approach.
Shares in Urban Logistics rose 3.7% to 151.00p on Friday morning, giving the company a total market capitalisation of £702.3 million. LondonMetric shares slipped 0.3% to 191.00p for a market capitalisation of £3.93 billion.
LondonMetric said the combined group would have a portfolio worth £7.3 billion and a pro forma market cap of £4.4 billion. Logistics assets would account for 55% of the portfolio, with 40% in higher-growth urban logistics.
LondonMetric said the acquisition will be implemented through a court-sanctioned scheme of arrangement and is expected to be completed by the end of June.
LondonMetric Chief Executive Andrew Jones said the deal will expand LondonMetric’s logistics platform and strengthen its strategy of targeting triple net leases that deliver stable and growing income.
‘Urban warehousing remains our strongest conviction call for organic rental growth across the UK real estate market,’ Jones said.
Urban Logistics Chair Nigel Rich said the board believed the offer provided shareholders with both a premium and ongoing exposure to the logistics sector.
‘The acquisition offers Urban Logistics shareholders a premium price for their shares, an attractive combination of cash and share consideration and ongoing exposure to the logistics sector via a company of greater scale and liquidity,’ he said.
LondonMetric also highlighted anticipated synergies, cost savings, and earnings accretion over the next two years, alongside increased access to capital and lower financing costs supported by its BBB+ credit rating by Fitch.
Urban Logistics shareholders will also be entitled to retain an interim dividend of 4.35p per share for the financial year ended March 31.
Following completion, Urban Logistics shareholders will own around 11% of the enlarged LondonMetric share capital.
Urban Logistics’ directors unanimously recommended the offer and have given irrevocable undertakings to vote in favour.
The scheme document is expected to be published by May 23.
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