NewRiver REIT has made a cash and share offer to acquire London-based REIT Capital & Regional for £147 mln (€175 mln).
Under the terms of the offer, Capital & Regional shareholders would be entitled to receive 31.25p in cash and 0.41946 NewRiver shares.
On the basis of the closing price per NewRiver share of 74.5 pence on 22 May 2024 (being the last day before the offer period commenced), the offer implies a value of 62.5p per Capital & Regional share, representing a premium of 21% to the closing price of a Capital & Regional share of 51.5p on that date.
Under the terms of the deal, Capital & Regional shareholders would own approximately 21% of the issued ordinary share capital of NewRiver.
It is proposed that the cash part of the offer would be funded from NewRiver’s existing cash resources and the net proceeds of the placing.
Both companies are focused on investing in the UK retail real estate sector, specifically shopping centres.
The NewRiver board said that it believes there is a strong strategic, operational and financial rationale for the combination and that the combined group would benefit from enhanced scale, material cost savings, mid- to high-teens accretion to UFFO per share, better access to acquisition and asset management opportunities, improved debt optionality, expected cost of capital benefits and the potential for increased share liquidity.
It added that following a challenging period for the UK retail real estate sector, in which capital values have materially rebased, with the MSCI UK Shopping Centres Index declining by 53% between June 2019 and June 2024, it believes the combination represents a unique opportunity to create a significantly enlarged portfolio at an attractive point in the market cycle.
The combined company would have a retail portfolio worth £0.9 bn, comprising 47 assets generating annualised rent of £90 mln, and with assets under management of £2.4 bn (comprising 84 assets).
Around 87% of Capital & Regional’s tenants are classified as value and essential goods retailers compared to 80% of NewRiver’s tenant base, which are considered low-risk.
Capital & Regional has become a target for multiple takeover attempts this year. Praxis Group, a private company specializing in UK shopping centers, entered the bidding race in July. Prior to that, NewRiver REIT had expressed interest in May, proposing a takeover to Capital & Regional’s majority shareholder, Growthpoint Properties.
Another potential buyer, Vukile Property Fund, withdrew its bid in May, leaving NewRiver as the sole contender for a brief period.
