Shaftesbury and Capital & Counties have confirmed that they are in discussions about a £3.5bn all-share merger.
The deal would combine the two West End estates, creating a 2.9m sq ft portfolio stretching from Covent Garden to Carnaby Street.
The market has been expecting a move by Covent Garden owner Capco since it bought Samuel Tak Lee’s 25% stake in Soho-centred Shaftesbury two years ago. Importantly, that deal gave Capco the power to block other potential buyers.
The companies confirmed talks following press reports of a potential deal at the weekend. The proposed merger is supported “in principle” by Norges, Norway’s sovereign wealth fund, which is the biggest shareholder in both companies, holding 26% of Shaftesbury and 15% of Capco. It will be structured as an acquisition of Shaftesbury by Capco, with shareholders in Shaftesbury, excluding the stake already owned by Capco, owning 53% of the combined company. Capco shareholders would own the remainder.
The merger will create a West End-focused REIT with a portfolio of 2.9m sq ft of lettable space, comprising 1.8m sq ft of retail and hospitality space, together with 1.1m sq ft of offices and housing.
The merged company will be led by Shaftesbury chair Jonathan Nicholls and Capco chief Ian Hawksworth. After 36 years at Shaftesbury, including 11 years as chief executive, Brian Bickell will retire on completion of the transaction. Executive directors Simon Quayle and Tom Welton, who have been with the company for over 30 years, will also leave the business, while Capco’s chair Henry Staunton will step down from the board.
Situl Jobanputra will become chief financial officer and Chris Ward the chief operating officer. The board will contain strong non-executive representation from both companies, with Richard Akers as the senior independent director. An executive committee, containing equal representation from the existing Shaftesbury and Capco leadership teams, will be responsible for the day-to-day management and operation of the combined company.
Capco’s Michelle McGrath will be responsible for the combined Covent Garden portfolio, and Shaftesbury’s Andrew Price will be responsible for the Carnaby, Chinatown and Soho portfolio. Samantha Bain-Mollison will lead group leasing.
Under UK takeover rules, a deal must be confirmed by 5pm on 4 June.
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