NewRiver REIT has announced a cash and share offer for rival local shopping centre real estate investment trust Capital & Regional.
It follows an initial announcement on 23 May that it had approached C&R's majority owner Growthpoint Properties about a potential bid. Subsequent potential offers from Praxis and Vukile have fallen away.
The boards of the two companies said that on the basis of the closing price per NewRiver share of 74.5 pence on 22 May 2024, the offer implies a value of 62.5 pence per Capital & Regional share and approximately £147 million for the business.
The boards said: "There can be no certainty that any firm offer will be made for Capital & Regional, nor as to the terms on which any offer, if made, will be made."
Under the terms of the offer, Capital & Regional shareholders would be entitled to receive 31.25p in cash and 0.41946 NewRiver shares.
The bid represents a premium of 21% to the closing price of a Capital & Regional share of 51.5p on that date. Capital & Regional shareholders would own approximately 21% of the issued ordinary share capital of NewRiver.
The cash part of the offer would be funded from NewRiver’s existing cash resources and the net proceeds of the placing.
Any firm offer, if made, would be subject to the approval of Capital & Regional shareholders and NewRiver shareholders would also be required to approve some resolutions.
Capital & Regional is a UK-focused retail property REIT specialising in shopping centres serving the non-discretionary and value-orientated needs of their local communities. It is listed on the Main Market of the London Stock Exchange and has a secondary listing on the Main Board of the Johannesburg Stock Exchange, with gross assets of £350 million at 30 June 2024 and a market capitalisation of approximately £144 million.
The NewRiver board said it believes that there is a strong strategic, operational and financial rationale for the combination and that the combined group would benefit from enhanced scale, material cost savings, and better access to acquisition and asset management opportunities, improved debt optionality, expected cost of capital benefits and the potential for increased share liquidity.
The merged company would have an £0.9 billion retail portfolio focused on community shopping centres and retail parks, generating annualised rent of approximately £90 million, valued in aggregate at £889 million.
The UK listed sector has been a busy one for takeovers and mergers in recent times as investors take advantage of the prevailing discount of share prices to net asset values to buy real estate.