The share price of URB Investments Ltd (ASX: URB) has gone up over 7% after the business received a sizeable takeover offer.
URB is a listed investment company (LIC) which aims to create long term growth by investing in a diversified portfolio of assets with exposure to urban renewal and regeneration. It invests in both ASX shares and direct property assets.
URB Investment’s Takeover
This morning URB announced that it has entered into takeover dealings with 360 Capital Total Return Fund (ASX: TOT) which will acquire 100% of URB.
Under the takeover, URB shareholders will receive 0.9833 360 Capital Total Return Fund units for each URB share they hold. Based on the most recent closing price of 360 Capital Total Return Fund units ($1.18), the implied value for URB shareholders is approximately $1.16 per URB share.
This implied value is at a 3% premium to the URB pre-tax net tangible assets (NTA) per share of $1.136 at 30 September 2019 on an ex dividend basis and allowing for transaction costs.
It was also at a higher premium to the share price. It was at a 13.2% premium to the last URB closing price, a 12.3% premium to the average price over the past 30 days and a 7.2% premium to the average price over the past three months.
What Will This Mean For 360 Capital Total Return Fund?
The business is still predicting a FY20 distribution of 9 cents, which will be higher than what URB shareholders had been receiving in terms of yield.
The combined entity will have an estimated market capitalisation of around $170 million.
360 Capital Total Return Fund will invest in a portfolio of direct & indirect real estate assets and real estate debt investments. It will have the ability to access direct real estate credit transactions through 50% ownership of AMF Finance.
Major URB shareholder Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is supportive of the merger and intends to vote in favour.
360 Capital Total Return Fund is a popular share among small cap investors and this move could be a good strategic move. I’m not looking to buy shares of either today, but I can understand why investors would like the deal.
For my own portfolio, I’d rather buy shares of the steadily growing businesses in the free report below.
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Disclosure: Jaz owns shares of Washington H. Soul Pattinson and Co. at the time of writing, but this could change at any time.