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Capital & Counties Properties and Shaftesbury merger to create £5bn West End real estate group

The City of London and the Swiss RE, also known as the Gherkin is seen from the 69th floor of the Shard during its inauguration in London July 5, 2012. The Capital & Counties Properties (Capco) and Shaftesbury merger will create a portfolio mainly in London’s West End of about 670 buildings across some 2 000 commercial and residential units. Image, REUTERS, Luke MacGregor.

The City of London and the Swiss RE, also known as the Gherkin is seen from the 69th floor of the Shard during its inauguration in London July 5, 2012. The Capital & Counties Properties (Capco) and Shaftesbury merger will create a portfolio mainly in London’s West End of about 670 buildings across some 2 000 commercial and residential units. Image, REUTERS, Luke MacGregor.

Published Jun 20, 2022

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The Capital & Counties Properties (Capco) and Shaftesbury merger will create a portfolio mainly in London’s West End of about 670 buildings across some 2 000 commercial and residential units.

The portfolio will comprise 35 percent retail, 34 percent hospitality and leisure, 17 percent offices and 14 percent residential. The trend precinct has seen a steady return of shoppers and patrons with the easing of Covid-19 restrictions.

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The Capco and Shaftesbury boards on Friday released details and terms of their “recommended all-share merger” to form a combined group, with the new merged company to be called Shaftesbury Capital once the deal is completed.

In terms of the mechanics of the merger, a scheme of arrangement by Shaftesbury, with the existing Capco shareholding, will result in Capco owning 100 percent of Shaftesbury’s shares.

Scheme shareholders will receive 3.356 new Capco Shares for each Shaftesbury share held.

Shaftesbury shareholders will then own 53 percent of the combined group and Capco shareholders 47 percent. Capco already holds 25.2 percent of Shaftesbury shares.

Norges Bank (the Central Bank of Norway), a substantial shareholder of Capco and Shaftesbury, has undertaken to vote in favour of the merger, and Madison International Realty Holdings, a Capco shareholder, also intends to vote in favour of the merger.

Taken together, and including shares held by Shaftesbury and Capco directors, some 35.3 percent of the votes are in favour of the merger.

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The group said the merger, located in some of the most iconic parts of London's West End, will create a leading mixed-use central London REIT, with the combined portfolio valued at about £5 billion, annualised income of about £165.5 million and an estimated rental value of about £218 million as at March 31, 2022.

“Their popularity provides a seven-days-a-week trading environment and exposure to an extensive and diverse local, domestic and international customer base, which has proven to be resilient throughout economic cycles,” Capco said on Friday.

The combined group would also have a strong balance sheet, improved trading liquidity and an enhanced profile in capital markets. This should provide an opportunity to improve its equity rating over time. Loan to value will be low at about 29 percent as at March 31, with liquidity at £500 million on completion.

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The combined group will retain Capco's listing on the London Stock Exchange as well as its secondary listing on the JSE on completion of the deal.

Capco shares fell 4.04 percent to R28.30 on Friday.

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