Quarz Capital urges merger between Ascendas Hospitality Trust and Ascott Residence Trust

The merger is said to bring an asset base and market cap exceeding $6.6b and $3.6b, respectively.

Investment manager Quarz Capital Management, Ltd. (QCM), a shareholder of Ascendas Hospitality Trust, issued an open letter urging for the merger of Ascendas Hospitality Trust (A-H Trust) and Ascott Residence Trust.

This follows CapitaLand’s $6b deal with Temasek Holdings that created create Asia’s largest diversified real estate company. The deal involved CapitaLand paying for Temasek units Ascendas Pte and Singbridge Pte.

QCM proposed that Ascott Trust acquire A-H Trust in a cash and unit transaction where 0.75 units of Ascott Trust and $0.18 of cash will be exchanged for 1 unit of A-H Trust (total value of $1.08 per unit, 8% premium to book value).

Jan F. Moermann, chief investment officer of QCM, said that Ascott-Ascendas Hospitality Trust would bring an asset base and market cap exceeding $6.6b and $3.6b respectively.

This could also provide A-H Trust unitholders a takeover premium of 20% whilst Ascott Trust unitholders can benefit from a 6% jump in DPU post-merger.

“The merger between CapitaLand and Ascendas will conceivably create additional uncertainty for unitholders. Capitaland will wholly-own the managers of both A-H Trust and Ascott Residence Trust (“Ascott Trust” or “ART SP”),” Moermann said in the letter.

Moermann stressed that CapitaLand would own 28% of A-H Trust and 45% of Ascott units. The overlapping investment mandates of both trusts would eventually create governance concerns especially in connection with acquisitions.