Brookfield Asset Management (BAM-T) and CPP Investments will acquire LXP Industrial (LXP-N) in all-cash deal valued at  US$5.2 billion (all figures in U.S. unless indicated), including debt and preferred equity.

The pension fund and companies announced this morning that a definitive merger agreement has been agreed.

West Palm Beach, Fla.-based LXP is one the largest warehouse and logistics facilities owners in the U.S. Its portfolio comprises 53 million square feet across 108 properties.

“LXP has assembled a high-quality industrial portfolio with modern logistics assets in attractive markets,” said Brookfield Real Estate CEO Lowell Baron.

"The acquisition aligns with our strategy of investing in high-quality real estate with durable cash flows and opportunities to create value through active asset management. We’re excited to partner with CPP Investments and build on LXP’s strong foundation.”

The announcement, released Monday morning by LXP, said the transaction has been unanimously approved by its board of trustees and is expected to close in Q4, subject to approval by LXP’s shareholders and satisfaction of other customary closing conditions. It is not subject to a financing condition.

LXP's portfolio

"The portfolio is characterized by modern assets, strong occupancy and long-duration leases that generate durable cash flows and is well positioned to benefit from the demand for high-quality, well-located logistics properties," the release said.

CPP Investments managing director and head of real estate Sophie van Oosterom said the acquisition reflected the strong fundamentals in U.S. industrial.

“The industrial sector, particularly in the U.S., continues to offer attractive long-term investment opportunities, supported by structural demand drivers including domestic manufacturing, evolving global supply chains and population growth across key Sunbelt markets,” she said in the announcement.

“We look forward to partnering with Brookfield and combining their operating expertise with a well-positioned portfolio to generate sustainable investment returns for the CPP Fund in the interests of CPP contributors and beneficiaries.”

Terms and go-shop period

Under the terms of the definitive merger agreement, LXP shareholders will receive US$61.20 per share in cash, which represents a 12.3 per cent premium to LXP’s 30-day volume weighted average price (VWAP) and 19.8 per cent premium to LXP’s 90-day VWAP, in each case for the period ended July 17.

The definitive agreement includes a 40-day "go-shop" period expiring at 11:59 p.m. New York City time on August 28, during which time LXP may actively solicit and consider alternative acquisition proposals and engage in discussions with third parties. Subject to the terms and conditions of the definitive agreement, including notice and negotiation rights in favour of the buyers, LXP may terminate the transaction and the definitive agreement to enter into a transaction that constitutes a superior proposal, subject to the payment of a termination fee.

“This transaction is the culmination of the LXP team’s successful execution of our strategic plan to transform LXP into a pure-play industrial REIT, curate a best-in-class portfolio, and implement our development program," Thomas W. Eglin, Jr., chairman and CEO of LXP, said. "The LXP Board unanimously determined that this transaction with Brookfield and CPP Investments fully maximizes value for our shareholders."

Under the terms, LXP has agreed to suspend payment of common share dividends until the earlier of the closing of the transaction or the termination of the definitive agreement.

Subject to and upon completion of the transaction, LXP’s shares will no longer trade on the New York Stock Exchange and LXP will become a privately held company.

In light of the pending transaction, LXP announced it does not intend to host a conference call for its Q2 financial results, scheduled for release on July 29.

According to the release, BofA Securities, Inc. is acting as lead financial advisor, J.P. Morgan Securities LLC is acting as co-financial advisor and Hogan Lovells Cadwalader US LLP is serving as legal advisor to LXP.

Citigroup Global Markets Inc. and Morgan Stanley & Co. LLP are serving as financial advisors, Gibson, Dunn & Crutcher LLP and Thompson Hine LLP are serving as legal advisors to Brookfield and CPP Investments, with DLA Piper LLP serving as legal advisor to CPP Investments in connection with certain aspects of the transaction. Dechert LLP is acting as legal advisor to Citigroup Global Markets Inc. and Morgan Stanley & Co LLP.

About the parties

Brookfield Asset Management Ltd. is a leading global alternative asset manager formerly based in Toronto, now headquartered in New York, with over US$1 trillion of assets under management across infrastructure, energy, private equity, real estate and credit.

CPP Investments manages the Canada Pension Plan Fund in the interests of more than 22 million contributors and beneficiaries. Headquartered in Toronto, with offices in Hong Kong, London, Mumbai, New York City, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan at arm’s length from governments. At March 31, the fund totalled C$793.3 billion. 

LXP Industrial Trust is a publicly traded real estate investment trust focused on class-A warehouse and distribution investments in 12 target markets across the Sunbelt and Midwest.