On 31st December 2021, Mapletree Commercial Trust (MCT) and Mapletree North Asia Commercial Trust (MNACT) jointly announced for a proposed merger between the two trusts.
The new combined entity named Mapletree Pan Asia Commercial Trust (MPACT), will become the 7th largest Reit in Asia by market capitalisation.
More details can be found here.
Now there will surely be supporters and detractors from both camps - MCT and MNACT, for the merger and rightly so.
In every merger there will be pros and cons. In this case I've been seeing a lot of negative feedback from MCT unitholders and some from MNACT unitholders as well.
The main grouse for the former is that the merger will increase MCT's gearing and 'lower' down the quality of their assets.
For MNACT unitholders, the most common feedback I've seen is that their DPU will be lowered upon merger.
For myself I have a small holding of MNACT and none of MCT. My current stand is neutral on the proposed merger.
However to help myself make the best decision regarding the merger, I did some quick calculations and arrived at some conclusions as follows.
Calculations
MCT share price at point of writing: $1.85
MNACT share price at point of writing: $1.09
My current MNACT holdings: 4,000 units
If I go for Option 1, I will receive: 2,003.6 MCT units + $764.80
If I go for Option 2, I will receive: 2,385.2 MCT unit
If I go for Option 3, I will receive: 100% cash per market price
So to see how the various options work out for me, I did the calculations based on several MCT and MNACT share price scenarios.
Conclusions
Based on the current MCT and MNACT share price of $1.85 and $1.09 respectively, the best option for me would be Option 1 in which I will have an equivalent amount of $4,471.45.
Pros: Highest value received
No transaction fees
Still eligible for MNACT's coming distribution and any clean up distribution
Con: Will have odd lots of MPACT in future
If MNACT share price moved up to $1.14 like it did earlier this week, Option 3 appears to be the best option for me as that would give me the highest immediate value.
However by selling my holdings I will miss out on the coming distributions. So need to factor this in when details are available and see how it measures against Option 1.
Pros: Highest value received if MCT stays below $1.89
No odd lots if I reinvest into MPACT
Not eligible for MNACT's coming distribution and any clean up distribution
If MCT share price moved above $1.89 and MNACT share price moved back to $1.14 or above, similar calculations can be done to see which option makes more sense.
For now we have at least until May 2022 to decide.
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