London property merger to create $6 billion West End powerhouse

By Aby Jose Koilparambil

(Reuters) -Two of London’s biggest property companies agreed to merge on Thursday to create a 5 billion pound ($6 billion) estate with sites in tourist hotspots including Covent Garden, Carnaby Street and Soho that are battling to recover from the pandemic.

Shaftesbury and Capital & Counties Properties combined property portfolio will comprises about 2.9 million square feet of lettable space in high-profile destinations in London’s West End.

“The merged business will have an exceptional portfolio, located in popular and busy parts of London’s vibrant West End, and an experienced and innovative team drawn from both businesses,” Shaftesbury CEO Brian Bickell said.

London landlords heavily exposed to non-essential retailers and hospitality firms are on a slow recovery path after coronavirus lockdowns.

Under the terms of the all-share deal, Shaftesbury shareholders will get 3.356 new Capital & Counties Properties (Capco) shares for each share held, valuing Shaftesbury at about 1.96 billion pounds ($2.37 billion) including the 25.2% stake Capco already owns.

Reuters calculated the valuation based on Capco’s closing price on Wednesday.

For Capco shareholders, the deal is expected to be earnings accretive immediately, while for Shaftesbury shareholders, the merger is expected to be modestly earnings dilutive in the first two years after completion.

Shaftesbury shares fell more than 8% to 534 pence in morning trade, while Capco stock was down 0.1%.

Existing shareholders in Shaftesbury will own 53% of the combined group – Shaftesbury Capital Plc. Capco shareholders will own the rest.

The newly created group will be led by Shaftesbury’s Jonathan Nicholls as non-executive chairman and Capco’s Ian Hawksworth as chief executive.

Shaftesbury CEO Bickell and Capco’s Chairman Henry Staunton will retire once the deal is completed.

The combined group will retain Capco’s listings on the London Stock Exchange as well as the Johannesburg Stock Exchange.

($1 = 0.8254 pounds)

(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Jane Merriman and Mark Potter)