UK real estate investment trust NewRiver REIT has acquired smaller rival Capital & Regional in a deal valued at £147 mln (€176 mln).
Capital & Regional shareholders will receive 31.25 pence in cash and NewRiver shares. The offer values each Capital & Regional share at 62.5 pence, representing a premium of over 21% to the pre-offer closing price.
Under the terms of the merger, Capital & Regional shareholders will hold a 21% stake in the combined company. Growthpoint will own 14%, while other Capital & Regional shareholders will have a combined 7% interest.
Growthpoint Properties, which owns 69% in Capital & Regional, has fully endorsed the merger which is expected to provide benefits such as increased liquidity, diversification, and lower operating costs.
Capital & Regional's six community shopping centres, primarily located in London and the South East of England, are leased to low-risk, essential retailers. These assets align well with NewRiver's existing portfolio. The merged company will have a focused portfolio of community shopping centres and retail parks, valued at approximately £889 mln (€1.06 bn). This portfolio will generate an annualized rent of £90 mln (€107.8 mln).
Based on property valuation reports prepared by Knight Frank and Colliers, the combined portfolio will consist of 47 assets. In total, the merged company will have assets under management valued at approximately £2.4 bn (€2.9 bn), including 84 assets.
Lynn Fordham, chair of NewRiver, said: ‘This is a compelling transaction which has a strong strategic, operational and financial rationale at an attractive point in the market cycle. The transaction will offer substantial cost savings and significant earnings accretion, enhancing the Combined Group's ability to pay a materially higher, covered dividend, whilst increased scale should also benefit future share liquidity for shareholders.’
Capital & Regional Chair, David Hunter, added: ‘The combination of these two complementary portfolios provides our shareholders with both upfront liquidity through the cash element and equity exposure to an enlarged UK REIT, offering increased share liquidity from a broader shareholder base. In addition, the combination will result in further asset and tenant diversification and lower operating costs than would otherwise be achieved by Capital & Regional on a standalone basis.’
Following the merger, NewRiver plans to delist Capital & Regional from the London Stock Exchange and the Johannesburg Stock Exchange, subject to shareholder and regulatory approval.
