Capital & Counties, Shaftesbury confirm R72bn merger talks

CAPITAL & Counties Properties (Capco), the UK-based property group, confirmed yesterday that it was in advanced discussions regarding a possible £3.6 billion (R72.bn) merger with Shaftesbury that has the approval of its main shareholder.

The possible merger would create a real estate investment trust 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.

“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 it was currently envisaged that the possible merger would be structured as an acquisition of Shaftesbury by Capco.

Capco, with a R26.7bn market capitalisation, is required by law to make its intentions known by 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.

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.

“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.

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.