Last Friday, the manager of Viva Industrial Trust (VIT) announced that it has agreed with the ESR-REIT Manager to extend the period of exclusivity till the earlier of 30 April 2018 or the date of a definitive implementation agreement between the parties.

Should an agreement on the merger be reached, we believe that the share swap ratio will likely be at least dividendneutral in order to entice the VIT unitholders to accept the offer.

On the other hand, should the relevant parties fail to reach an agreement, we expect the uncertainty associated with ongoing discussions to be alleviated, which may in turn help the unit price recover to prior levels.

We maintain BUY on VIT with a fair value of S$0.93.

Source: OCBC Research - 2 Apr 2018