REG - abrdn Euro Logistics - Conclusion of Strategic Review

abrdn European Logistics IncomeAnnouncement

20/05/2024 11:15

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RNS Number : 1144P  abrdn European Logistics Income plc  20 May 2024

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INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE
A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

 

Date: 20 May
2024

 

For Immediate Release

 

abrdn European Logistics Income plc

Conclusion of the Strategic Review and Formal Sale Process

 

The Board of abrdn European Logistics Income plc (the "Company") announces the
outcome of the Strategic Review (the "Strategic Review") and Formal Sale
Process that commenced on 27 November 2023.

Strategic Review Background

The Board launched the Strategic Review recognising that the Company faces a
number of challenges, at both a macro and company specific level. As
previously noted, these challenges include the Company's materially uncovered
annual target dividend of 5.64 cents (€) per share, a market capitalisation
of £234 million¹ liable to deter some potential investors due to lower share
liquidity, and the Company's shares trading at a significant and persistent
discount to the net asset value per share. Additionally, in line with its
constitutional terms as set out on launch in December 2017, the Company has
proposed a continuation vote at the forthcoming Annual General Meeting on 24
June 2024.

Following the commencement of the Strategic Review, the Company's Financial
Adviser, Investec Bank plc ("Investec") has engaged with a significant number
of interested parties with a view to facilitating an indicative proposal which
would fulfil the Strategic Review's objective of maximising returns for
Shareholders. Following a period of due diligence, eleven interested parties
submitted an initial indicative proposal in the first quarter of 2024.
Submissions included proposals regarding all-share mergers, changes to the
investment management arrangements, recapitalisation schemes and cash offers
for the portfolio or Company. Reflecting continued Shareholder feedback, the
Board and Investec focused efforts on those submissions proposing a cash offer
for the portfolio or the Company. Access to additional confidential non-public
Company information was provided and following a further period of due
diligence, remaining interested parties were invited to submit revised offers,
as a result of which a limited number of indicative offers were forthcoming.

As part of the Strategic Review, the Company's investment manager, abrdn Fund
Managers Limited (the "Investment Manager"), provided the Board with analysis
of, and a proposal involving, a managed disposal of the portfolio in a timely
manner. The analysis comprised a range of detailed disposal scenarios over an
illustrative period of 12-24 months for the entire portfolio, with capital
being returned to Shareholders from Q4 2024 and expected quarterly thereafter;
and it considered the impact of likely disposal costs, local applicable
capital gains taxes, the ongoing running costs of the Company and the optimal
approach to repaying or maximising the value of the Company's fixed cost
debt.

Outcome of the Strategic Review

Following a detailed review of the options available to the Company and after
consultation with its advisers, as well as taking into account feedback
received from a number of larger Shareholders, the Board has concluded that it
would be in the best interests of Shareholders as a whole to put forward a
proposal for a managed wind-down of the Company (the "Managed Wind-Down"). In
arriving at this decision, the Board placed particular importance on the
following factors:

·      Shareholder Value Maximisation: the indicative potential value
from the Managed Wind-Down is materially in excess of the net value achievable
from the indicative cash offers received, all of which were subject to a
number of preconditions and all of which represented material discounts to the
Company's current net asset value. With an EPRA vacancy rate of 6.5%², the
Managed Wind-Down provides the potential opportunity to capture the value
associated with letting this vacant space ahead of a disposal.

 

·      Feedback from Potential Offerors: a significant majority of
interested parties communicated a strong preference to acquire assets within
certain geographies or individual assets as an alternative to acquiring the
entire portfolio, providing comfort as to the likely level of offeror interest
in the Managed Wind-Down process. With a diversified portfolio of 25 urban and
mid-box logistics assets with an aggregate value of approximately €616
million³, the pool of potential offerors is expected to be large, with many
of these parties now conversant with the Company's assets.

 

·      Indicative Timeline: while further details will be provided in
due course, under the Managed Wind-Down it is expected that the majority of
the assets will have been disposed of by the end of the second quarter of
2025. The Company's advisers have completed a substantial amount of
preparatory work including commissioning fully updated technical and
environmental due diligence reports for the entire portfolio, ensuring that
the Managed Wind-Down process can commence promptly after Shareholder approval
of the required amendments to the Company's investment objective and
investment policy.

 

·      Macroeconomic Backdrop: alongside positive thematic demand
drivers for logistics tenants such as e-commerce and nearshoring, a forecast
lower interest rate environment in the second half of 2024 and first half of
2025 is expected to support transaction volumes and pricing, resulting in a
more favourable investment backdrop against which to wind down the portfolio.

As the Strategic Review and Formal Sale Process have now concluded, the
Company is no longer in an "offer period" as defined by the City Code on
Takeovers and Mergers (the "Takeover Code") and the disclosure requirements
pursuant to Rule 8 of the Takeover Code are no longer applicable from the time
of this announcement.

Amendments to the Investment Objective and Policy

The implementation of the Managed Wind-Down will require amendments to the
Company's investment objective and investment policy. Such amendments are
subject to the approvals of the Financial Conduct Authority and Shareholders
pursuant to Listing Rule 15. Accordingly, the Board intends to publish a
circular (the "Circular") in June 2024 to convene a general meeting (the
"General Meeting") at which it will seek approval from Shareholders of the
proposed new investment policy by way of ordinary resolution.

Investment Management Arrangements

The Board has commenced discussions with the Investment Manager in respect of
proposals for the provision of investment management services during the
Managed Wind-Down under revised terms that will seek to further align the
Investment Manager to achieve the objective of maximising Shareholder returns
in a timely manner. Further information will be set out in the Circular.

Dividend Policy

Should Shareholders vote to approve the Managed Wind-Down, it is the Board's
current intention to continue paying dividends in order to maintain the
Company's investment trust status and on the basis of being fully covered by
adjusted earnings. The level of dividend payments will decline as the
portfolio reduces in size and as capital is returned to Shareholders. Ahead of
the General Meeting, the Board expects to declare a first quarterly interim
dividend and a further announcement is expected shortly on this.

Continuation Vote

In line with its constitutional terms as set out on launch in December 2017,
the Company has proposed a continuation vote (the "Continuation Vote") at the
forthcoming Annual General Meeting on 24 June 2024. In the 2023 Annual Report,
the Board recommended that Shareholders vote in favour of the Company's
continuation to ensure that the Strategic Review could be satisfactorily
completed. In light of the outcome of the Strategic Review, the Board now
recommends that Shareholders vote against resolution 13 at the Annual General
Meeting (being the Continuation Vote resolution).

Tony Roper, Chairman, abrdn European Logistics Income, commented: "The Board
undertook the Strategic Review to enable it to comprehensively evaluate all
options for Shareholders, with strong interest shown in the Company. Despite
retaining a high conviction in the logistics asset class and investment
strategy, given the challenges facing both the Company and the broader
investment trust sector, the Board has concluded that a Managed Wind-Down in a
timely manner is the optimal route to maximise Shareholder value in the short
to medium term. The Board thanks Shareholders for their engagement and
feedback throughout this process."

 

 Enquiries

 Investec Bank plc (Financial Adviser and Corporate Broker)                                             +44 (0) 20 7597 4000

 David Yovichic

 Denis Flanagan

 FTI                                                                                                    +44 (0) 20 3727 1000
 Consulting

                                                                                                      aseli@fticonsulting.com (mailto:aseli@fticonsulting.com)
 Dido Laurimore

 Richard Gotla

 Oliver Parsons

 

 

Investec Bank plc, which is authorised in the United Kingdom by the Prudential
Regulation Authority and regulated in the UK by the Financial Conduct
Authority and the Prudential Regulation Authority, is acting exclusively for
the Company and no one else in connection with the Strategic Review and shall
not be responsible to anyone other than the Company for providing the
protections afforded to clients of Investec, nor for providing advice in
connection with the Strategic Review or any matter referred to herein. Neither
Investec nor any of its affiliates (nor any of its or their respective
directors, officers, employees, representatives or agents) owes or accepts any
duty, liability or responsibility whatsoever (whether direct, indirect,
consequential, whether in contract, in tort, under statute or otherwise) to
any person who is not a client of Investec in connection with the Strategic
Review, this announcement, any statement contained herein or otherwise.

This announcement is not intended to, and does not, constitute or form part of
any offer, invitation or the solicitation of an offer to purchase, otherwise
acquire, subscribe for, sell or otherwise dispose of, any securities whether
pursuant to this announcement or otherwise.

The distribution of this announcement in jurisdictions outside the United
Kingdom may be restricted by law and therefore persons into whose possession
this announcement comes should inform themselves about, and observe, such
restrictions. Any failure to comply with the restrictions may constitute a
violation of the securities law or any such jurisdiction.

 

This announcement is released by the Company and the information contained
within this announcement is deemed by the Company to constitute inside
information for the purposes of Article 7 of the UK version of the EU Market
Abuse Regulation (Regulation (EU) No.596/2014) which forms part of UK law by
virtue of the European Union (Withdrawal) Act 2018, as amended. Upon the
publication of this announcement via a Regulatory Information Service, such
information is now considered to be in the public domain.

 

LEI Number

The Company's LEI Number is 213800I9IYIKKNRT3G50

 

¹ Market capitalisation as at 24 November 2023

² EPRA vacancy rate as at 31 March 2024

³ Portfolio valuation as at 31 December 2023, excluding the Meung Sur Loire
asset which has been disposed of per the announcement on 27 March 2024

 

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