Two of the West End’s biggest landlords have agreed to merge, creating a £5billion estate covering some of London’s best-known tourist destinations.
Capital & Counties, which owns Covent Garden, and Shaftesbury, which has a portfolio spanning parts of Soho, Chinatown and Carnaby Street, announced terms for an equity merger on Thursday morning.
The deal will be subject to shareholder approval, and the companies are expected to face some pushback, with two Shaftesbury investors – Royal London Asset Management and Investec – having already questioned whether a merger was in their best interest.
However, Shaftesbury and Capco’s largest shareholder, Norges Bank Investment Management, Norway’s sovereign wealth fund, will vote in favor of the deal.
The fund, which owns 25% of Shaftesbury shares and 15% of Capco shares, has long backed a merger, the companies say.
Under the terms of the deal, existing Shaftesbury shareholders will own 53% of the newly formed group and Capco shareholders 47%.
Ian Hawksworth, chief executive of Capco, will lead the combined group, which will be called Shaftesbury Capital.
Brian Bickell, who led Shaftesbury for more than a decade, will retire following the merger.
The deal will end a pre-pandemic courtship, with the two companies having long discussed the merits of a tie-up that will give the combined group control of one of the most popular retail and leisure destinations in the world. the capital.
Hawksworth said the new management team would seek to invest in the West End public realm and focus on continuity rather than change.
He described his role as “doing lots and lots of little things really. It’s about creating dynamic areas and lots of choices for consumers, [playing a] long-term guardian role for this domain”.
The recovery of the area, since Covid-19 forced tenants to close stores for long periods of 2020 and 2021, has given the management of both teams more confidence to pursue the agreement, he said. added.
Over the next two years, Shaftesbury Capital expects to reduce its annual costs by £12 million as a result of the merger.
The companies expect to complete the deal before the end of the year, with shareholders receiving 3.35 new Capco shares for each Shaftesbury share.
However, not all shareholders are in favor.
Mike Fox, head of sustainable investments at Royal London Asset Management, said “the terms announced today are unattractive and do not reflect the inherent value of the Shaftesbury estate. It is unclear why it is in the interest of Shaftesbury shareholders to accept them.
Investec, which owns 1.65% of Shaftesbury, has also previously raised concerns about the merger.
Capco was advised by Rothschild & Co, UBS and Jefferies. Shaftesbury were advised by Evercore and Blackdown.