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Capital & Counties, Shaftesbury confirm R72bn merger talks

The possible deal will create an REIT focused on the West End of London. File photo.

The possible deal will create an REIT focused on the West End of London. File photo.

Published May 10, 2022

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CAPITAL & Counties Properties (Capco), the UK-based property group, confirmed yesterday that it was in advanced discussions regarding a possible £3.6 billion (R72bn) merger with Shaftesbury that has the approval of its main shareholder.

The possible merger would create an REIT focused on the West End of London, with a portfolio of 2.9 million square feet of lettable space located in high-profile destinations, including Covent Garden, Carnaby, Chinatown and Soho.

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“Discussions are ongoing and the full terms of a possible merger have not been finalised. There can be no certainty that an offer will be made.The announcement of a firm intention to make an offer remains subject to the satisfaction or waiver of a number of customary pre-conditions including, inter alia, completion of reciprocal confirmatory due diligence,” it said, adding that it was currently envisaged that the possible merger would be structured as an acquisition of Shaftesbury by Capco.

Capco, with a R26.7bn market cap, is required by law to make its intentions known on June 4.

The shares leapt 5.64 percent after the announcement at the start of the day, trading at a high of R33.33.

The combined ownership would comprise 1.8 million square feet of retail and hospitality space, together with office and residential accommodation of 1.1 million square feet.

Capco, in the year ended December 31, reported a total equity of £1.8bn, while underlying net rental income increased from £43.6m to £52.3m.

Under the proposed terms of the possible merger, it was envisaged that Shaftesbury shareholders, excluding the Shaftesbury shareholding owned by Capco, would own 53 percent of the combined company, and Capco shareholders would own 47 percent of the combined company.

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Capco bought a 25.2 percent stake in Shaftesbury in June 2020 for £436 million from Hong Kong billionaire Samuel Tak Lee and currently owns 97 million shares in Shaftesbury.

The exchange ratio would not be impacted by the Shaftesbury shares held as security, Capco said.

“Norges Bank, a major shareholder in both Shaftesbury and Capco, understands the strategic rationale and has signalled its support for the two companies to explore a merger. Norges Bank has, therefore, subject to review of the final terms and conditions of any transaction, expressed its willingness in principle to support a combination in due course,” Capco said.

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Capco, which is listed on the London Stock Exchange, said it intended to retain its secondary listing on the JSE following the deal.

“The ownership ratios have been agreed between the boards of Shaftesbury and Capco taking into account the relative net tangible assets and market capitalisations of both companies,” Capco said.

The combined company would have a clear governance and leadership structure, led by Jonathan Nicholls as chairman and Ian Hawksworth as CEO. Situl Jobanputra would be the chief financial officer and Chris Ward would be the chief operating officer.

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The board would contain strong non-executive representation from both companies, with Richard Akers as the senior independent director.

An executive committee, containing equal representation from the existing Shaftesbury and Capco leadership teams, would be responsible for the day-to-day management and operation of the combined company, with Capco’s Michelle McGrath responsible for the combined Covent Garden portfolio, and Shaftesbury’s Andrew Price responsible for the Carnaby, Chinatown and Soho portfolio, with Samantha Bain-Mollison for group leasing.

Capco said that Brian Bickell, after 36 years at Shaftesbury, including 11 years as CEO, would retire on completion of the transaction. Executive directors Simon Quayle and Tom Welton, who had also been with the company for more than 30 years, will also leave the business. Henry Staunton, the chairman, and Jonathan Lane, non-executive director, would retire from the board of Capco on completion.

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