Dow Jones has reported that Mapletree Investments and CapitaLand Investment (CLI) are exploring a merger. The plans are in the very early stages and a deal may or may not materialise, the report said. This is not the first time such market talk has emerged.
As analysts weigh in, a CLI spokesperson maintains that CLI won't comment on rumours. The spokesperson tells The Edge Singapore: "CLI remains firmly committed to delivering long-term value for its shareholders and in the ordinary course of its business, it regularly explores and evaluates various investment opportunities that align with its strategic objectives.
"We are aware of recent market speculation. As a matter of policy, CLI does not comment on rumours or speculation. Should there be any matters requiring disclosure, CLI will make the announcements in accordance with the Listing Manual of the SGX-ST."
Analysts reckon that such a transaction would excite the market and they are likely to estimate and guesstimate the different permutations and combinations of such a transaction. DBS says a sizeable part of Mapletree Investment’s $70 billion AUM comprise balance sheet and development projects. As such, both CLI and CapitaLand Development are likely to be involved in the merger should there be any truth in the current merger talk.
If the ultimate goal is to achieve scale, CLI will achieve its long-stated $200 billion AUM target. “Given its larger scale, it will be positive for the stock, especially when it is trading at 1x P/B vs Keppel, which is at 1.4x P/B. Amongst the REITs, there will be a second-order impact. It is clear Mapletree Pan Asia Commercial Trust (MPACT), if it is going to merge with CapitaLand Integrated Commercial Trust (CICT), will be acquired at NAV of $1.80,” says DBS.
According to another analyst who covers CLI and the various Mapletree-sponsored REITs, he points out that the possibility of such a deal is not new. However, with CLI’s ambitious $200 billion AUM target and need for a major share price catalyst, there could be an urgency to get this deal done.
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"Mapletree, on the other hand, has been facing challenges from its overseas markets and thus, in our view, may be more open to such a merger. Overall, we believe if a merger happens, it is likely to be a positive catalyst for CLI's share price although the upside will largely depend on final deal metrics,” says the analyst.
Xavier Lee, an analyst at Morningstar, says if CLI and Mapletree Investments were to merge, the REITs managed by both entities are likely to consolidate to mitigate potential conflicts of interest.
"Likely candidates for merger include Mapletree Industrial Trust with CapitaLand Ascendas REIT, or CICT with MPACT, given their overlapping asset classes. That said, REIT mergers are often complex and may face resistance from minority unitholders due to concerns around valuation, DPU dilution, and portfolio composition," Lee observes.
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"From CLI’s perspective, a merger with Mapletree Investments would create a formidable international real estate platform with an estimated FUM of $180 billion. This could unlock cost synergies, similar to those achieved during the CapitaLand–Ascendas-Singbridge merger in 2019.
"However, in terms of asset class diversification, the acquisition may offer limited incremental benefit, as CLI already has broad exposure across similar segments. Additionally, Mapletree’s development arm may require restructuring or exclusion from the deal to align with CLI’s asset-light fund management strategy," Lee notes.
