NewRiver agrees £147m takeover of Capital & Regional

24th Sep 2024 09:11

(Sharecast News) - NewRiver REIT announced a recommended cash and share offer to acquire Capital & Regional on Tuesday, in a deal valued at £147m.

The acquisition would see Capital & Regional shareholders receive 31.25p in cash and 0.41946 NewRiver shares for each of their existing shares.

Based on NewRiver's closing share price of 74.5p on 22 May, the offer valued each Capital & Regional share at 62.5p, representing a 21% premium to the closing price before the offer period.

Post-acquisition, Capital & Regional shareholders would hold around 21% of the combined entity.

The merger was expected to create a combined portfolio of 47 retail assets valued at £889m, with assets under management of £2.4bn.

NewRiver said the combined group would focus on community shopping centres and retail parks, primarily in London and the South East, enhancing its appeal to value-oriented and essential retail tenants.

It anticipated significant financial benefits from the merger, including annual cost savings of £6.2m through operational efficiencies and the removal of duplicated functions.

The deal was also projected to be earnings accretive, potentially supporting a higher dividend yield.

It said the combined group's weighted average cost of debt was expected to be around 3.5%, with no maturities on drawn debt until January 2027, and a focus on maintaining a conservative leverage profile.

Shareholders of Capital & Regional would also be entitled to retain an interim dividend of up to 2.85p per share, with NewRiver shareholders expected to receive a separate interim dividend post-completion.

They could also be eligible for a NewRiver dividend of 1.3p per share, depending on when the transaction is finalised in relation to the record date.

The boards of both companies unanimously recommended the transaction, which also had the support of Growthpoint, Capital & Regional's largest shareholder with a 69% stake.

Following the merger, Growthpoint would hold 14% of NewRiver's issued share capital, and had committed to certain lock-up arrangements post-transaction.

"This is a compelling transaction which has a strong strategic, operational and financial rationale at an attractive point in the market cycle," said NewRiver chair Lynn Fordham.

"Combining the complementary retail portfolios of NewRiver and Capital & Regional will create an enlarged specialist real estate investment trust with a £0.9bn portfolio of high quality, well-located assets, including 29 community shopping centres and 13 retail parks across the UK and Northern Ireland.

"Both portfolios share a focus on convenience, value and essential goods and services, and are well positioned to benefit from future rental growth, supported by NewRiver's retail asset management platform."

David Hunter, chair of Capital & Regional, added that the combination of the companies' two portfolios would provide shareholders with upfront liquidity through the cash element, and equity exposure to an enlarged UK REIT, offering increased share liquidity from a broader shareholder base.

"In addition, the combination will result in further asset and tenant diversification and lower operating costs than would otherwise be achieved by Capital & Regional on a standalone basis.

"Capital & Regional shareholders will also benefit from exposure to a business with a £0.9bn property portfolio, a strong balance sheet and a combined track record of sustained dividend growth, providing an excellent opportunity to deliver ongoing value for shareholders."

At 1002 BST, shares in NewRiver REIT were down 0.24% at 82.1p, while those in Capital & Regional were up 2.24% at 63.8p.

Reporting by Josh White for Sharecast.com.