London REITs Capco, Shaftesbury agree merger

Listed UK property groups Capital & Counties Properties (Capco) and Shaftesbury have agreed to merge to create a mixed-use central London real estate investment trust with a £5bn (€5.9bn) portfolio.

Following an announcement last month confirming ”advanced discussions regarding a possible all-share merger”, the two companies said they have now agreed to a merger whereby Shaftesbury shareholders are being offered 3.356 new Capco shares for each Shaftesbury share they hold.

The Capco Group already holds approximately 25.2% of Shaftesbury’s issued share capital.

Subject to approvals, Shaftesbury and Capco shareholders will own 53% and 47% respectively of the combined group which will be called Shaftesbury Capital.

The companies said the merger is supported by Norges Bank, which holds a 26% stake in Shaftesbury and a 15% stake in Capco. Madison International Realty Holdings, a 4.1% shareholder of Capco, has also agreed to vote in favour of the merger.

Commenting on the merger, Mike Fox, the head of sustainable investments at Royal London Asset Management, said the merger terms are “unattractive and fail to reflect the inherent value” of the Shaftesbury estate. “It is unclear why it is in the interests of Shaftesbury shareholders to accept them.” Royal London Asset Management holds 3% in Shaftesbury.

Shaftesbury, which has a market capitalisation of around £2.1bn, invests exclusively in London’s West End. Its portfolio is clustered mainly in iconic retail and restaurant locations in Carnaby, Seven Dials and Chinatown. Shaftesbury’s portfolio also includes substantial ownerships in East and West Covent Garden, Soho and Fitzrovia.

Capco’s portfolio includes the landmark Covent Garden estate, which represents over 1.1m sqft of space. Capco has a market capitalisation of around £1.3bn.

The combined group’s portfolio will comprise approximately 670 predominantly freehold buildings with approximately 2.9m sqft of lettable space across 2,000 commercial and residential units.

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