West End landlords Capco and Shaftesbury in talks over £3.5bn merger | business news

Two companies behind much of London’s West End are in advanced talks of a £3.5 billion merger that would bring together world-famous tourist destinations, including Covent Garden and Chinatown, in joint ownership.

Sky News has learned that Capital & Counties Properties – also known as Capco – and Shaftesbury are in detailed talks about an all-share merger, which could be announced within weeks.

If completed, the merger would bring together two of London’s most prominent landlords and create a powerhouse of West End property ownership as the capital tries to chart its path to a prosperous post-pandemic future.

Capco leases shops and restaurants in Covent Garden, while Shaftesbury owns parts of other prime London landmarks such as Carnaby Street, Chinatown and Seven Dials.

Speculation of a link between the two companies has persisted since May 2020, when Capco bought property magnate Samuel Tak Lee’s 26 per cent stake in Shaftesbury for £436million.

One analyst said Norges Bank, Norway’s sovereign wealth fund, would likely be a key player in a merger given its large stakes in Capco and Shaftesbury.

Both Capco and Shaftesbury were hit hard by this Coronavirus Pandemic, with the latter raising around £300m from a share sale in autumn 2020.

Capco participated pro rata in this cash call and was able to keep its share.

The Covent Garden property lost over a quarter of its value in 2020, reflecting the sharp drop in visitor numbers early in the year COVID-19 Crisis.

Capco is the lessor of shops and restaurants in Covent Garden

Many commercial property owners were forced to step in to give retailers and hospitality companies rent discounts two years ago when dozens of prominent chain stores and restaurants collapsed.

Debenhams, TopShop, Carluccio’s and Prezzo were among the victims, either falling victim to administration or enacting restructuring plans that hit creditors including landlords.

In the last few months, the landlords have struck a more positive tone, despite uncertainties caused by the Omicron variant and the switch to hybrid working.

Shaftesbury said in February that the vacancy rate had fallen below 5% for the first time since the pandemic began.

Capco chief executive Ian Hawksworth said the same month that the outlook had become more positive.

“We are pleased with the strong rental demand for Covent Garden, which has contributed to an improvement in valuations in the second half of the year.

“With footfall continuing to increase, customer sales approaching 2019 levels and our creative approach, Covent Garden is the liveliest area in the West End and well positioned for further rental growth,” he added.

Shops and restaurants on Carnaby Street London
Shaftesbury has parts of other top attractions such as Carnaby Street and Chinatown
A guardian lion statue with crowded London Chinatown in the background

On Friday, Capco shares closed nearly 3% higher amid speculation that Capco could be a takeover target for an unnamed suitor.

The surge left Capco with a market cap of around £1.37 billion.

Shaftesbury, on the other hand, closed just under 1% lower at 577p, giving it a market value of £2.23bn.

Further details of the proposed merger structure, including the prospective leadership of the combined group, were unclear as of Saturday morning.

However, both companies will likely be forced to confirm the talks to the London Stock Exchange when it opens on Monday.

Mr Hawksworth and his Shaftesbury counterpart, Brian Bickell, are both respected figures in the commercial real estate sector, although it is not certain whether either would remain in a common group.

There could also be scope for significant cost synergies from the transaction.

Capco’s history dates back to the 1930s, although it did not acquire the Covent Garden piazza until 2006, while Shatesbury, which owns 16 acres in the West End, was founded in 1985 and floated to London the following year.

Capco is to be advised by bankers at Rothschild, while Blackdown Partners and Evercore Partners advise Shaftesbury.

Shaftesbury declined to comment, while Capco was asked for comment.

West End landlords Capco and Shaftesbury in talks over £3.5bn merger | business news

Source link West End landlords Capco and Shaftesbury in talks over £3.5bn merger | business news

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