More quoted companies are expected to quit the stock market after MEPC opted to go private this week.
The UK’s fourth-largest property company intends to delist in a £2bn deal with Hermes and GE Capital.
Commentators said other quoted companies were disenchanted with the stock market’s disdain. “If it can happen to MEPC, it can happen to anyone,” said Regalian chairman David Goldstone.
MEPC announced on Thursday that it has recommended its shareholders accept a 550p per share offer from Leconport Estates, a 50:50 joint venture between Hermes, acting for BT Pension Fund, and GE Capital Real Estate.
The offer values MEPC at £1.92bn, excluding debt. The offer per share was at a 25% premium to the closing price on Wednesday and a 3% discount to NAV adjusted for debt and tax liabilities. The sector average discount to NAV is 27%.
The deal is the result of two months of talks between MEPC and GE Capital. MEPC chief executive Jamie Dundas said: “This is the right deal for shareholders.” Alastair Ross Goobey, chief executive of Hermes, and Charles Alexander,
president of GE Capital Europe, said the deal was made attractive by MEPC’s decision to focus on business space and service provision. They said there were no plans to refloat MEPC at a later date, either as a property company or as a business services company.
Peter Thornton, chief executive of Greycoat, which went private in a Mercury Asset Management-backed deal, said: “It’s fantastic and I am sure it will work.
It’s been brilliant for us to be out of the public sector – like a breath of fresh air.”
Peter Olsberg, head of property investment at Mercury Asset Management, said: “It seems there will be further consolidation in the industry. Property is being returned to those investors who own direct property, which seems a sensible way forward while the stock market underrates the sector.”
HSBC analyst John Atkins said: “This will work for everyone, both shareholders and those involved in the deal.”
Analysts cited British Land, with the largest discount to NAV in the sector, Land Securities and Hammerson as likely candidates. They stressed, however, that companies such as Slough Estates, which is already well focused on one sector, would be more attractive.
The deal will see MEPC chairman Sir John Egan step aside in favour of a chairmanship that rotates between GE Capital and Hermes. MEPC managers will remain and benefit from a new bonus pool if returns average more than 15% over three years.
At 20%, the pool would be £18m, with a maximum of £65m if returns hit 28%. The pool will be shared largely between the 15 most senior managers.
Existing strategy will continue, including the sale of retail and nursing home assets and a jv with Westfield Holdings involving MEPC’s nine largest shopping centres.
MEPC also unveiled its interims for the six months to 31 March, with pretax profit, including exceptional gains on disposals, rising to £69.5m.
(This article appears in tomorrow’s edition of Estates Gazette.)
EGi News 02/06/00
