UK REITs Shaftesbury and Capital & Counties (Capco) have confirmed they are in talks over a potential merger which would create a £3.5 bn (€4 bn) London-focused property firm with significant holdings in the West End.
Shaftesbury has a £2.2 bn market cap while Capco a £1.4 bn valuation. Together, the firms would vaunt some 2.9 million ft2 (270,000 m2) of space across Covent Garden, Carnaby, Chinatown, and Soho.
The combined portfolio would comprise around 1.8 million ft2 of retail and leisure space, and some 1.1 million ft2 of office and residential assets.
Capco already signalled an interest in its peer when it bought a 26.3% stake in Shaftesbury priced at 540 pence per share in May 2020, as Hong Kong property billionaire Samuel Tak Lee exited his significant minority stake in the firm for £436 mln.
Under the proposed terms of the merger, Shaftesbury shareholders, excluding the Shaftesbury shareholding owned by Capco, would own 53% of the combined company, and Capco shareholders would own 47% of the combined company.
Capco currently owns around 97 million shares in Shaftesbury, representing approximately 25.2% of the existing share capital of Shaftesbury, including some 38 million shares currently held as security for Capco's exchangeable bond.
The combined company would be led by Shaftesbury's current chairman Jonathan Nicholls, continuing as chair of the new entity, while Capco boss Ian Hawksworth would take the CEO role.
Situl Jobanputra will be the CFO and Chris Ward will be the COO under current proposals. After 36 years at Shaftesbury, including 11 years as CEO, Brian Bickell has indicated he will retire on completion of the transaction.
Executive directors Simon Quayle and Tom Welton, who have also been with the company for over 30 years, will also leave the business. Henry Staunton, chairman, and Jonathan Lane, non-executive director, will retire from the Board of Capco on completion.
Norges Bank, a major shareholder in both Shaftesbury and Capco, said it understood the strategic rationale and signalled its support for the two companies to explore a merger.
The merger, which depends on conditions including the completion of reciprocal confirmatory due diligence, requires Capco to make a firm offer no later than 4 June to acquire Shaftesbury. As such, the deal will be structured as a Capco takeover.
Evercore and Blackdown Partners are providing financial advice to the Shaftesbury board while Liberum Capital Limited is acting as corporate broker to Shaftesbury.
Rothschild & Co is providing financial advice to the Capco board, with UBS Investment Bank, Jefferies International Limited and Peel Hunt LLP acting as corporate brokers to Capco.
