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Acquisition of significant stake in Shaftesbury PLC
Capital & Counties Properties PLC
(Incorporated and registered in the United Kingdom and Wales with registration Number
07145041 and registered in South Africa as an external company with Registration Number
2010/003387/10)
JSE code: CCO
ISIN: GB00B62G9D36
1 June 2020
LEI: 549300TTXXZ1SHUI0D54
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO
OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF
THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION
FOR IMMEDIATE RELEASE
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
CAPITAL & COUNTIES PROPERTIES PLC (“Capco” or “the Company”)
Acquisition of significant stake in Shaftesbury PLC
Capco today announces that it has agreed to acquire a 26.3% shareholding in Shaftesbury PLC
(“Shaftesbury”) across two tranches for total consideration of £436 million, at a price of 540 pence
per Shaftesbury share (the “Investment”), representing a discount of 13.9% to the closing
Shaftesbury share price on 29 May 2020.
The shares are being acquired from Veloqx (Jersey) Limited, as trustee of the Veloqx settlement,
a discretionary trust established by Samuel Tak Lee for the benefit of himself and his immediate
family.
Highlights
• Unique opportunity to acquire a significant stake in an exceptional mixed-use real estate
portfolio, adjacent to Capco’s world-class Covent Garden estate
• Attractive investment and entry price relative to historical levels and the Board’s view of the
future long-term prospects for prime central London
• Consistent with Capco’s strategy to invest in attractive and complementary opportunities on
or near the Covent Garden estate
• Capco maintains a strong balance sheet with access to significant liquidity – on a pro forma
basis as at 31 March 2020, the Investment results in an LTV of 30%, with £525 million of
cash and undrawn committed facilities
Ian Hawksworth, Chief Executive of Capco, commented:
“As long-term investors in the Covent Garden estate and the West End, the investment in
Shaftesbury represents a unique opportunity to deploy our capital in an exceptional portfolio at an
attractive entry price, which we believe will generate long-term value for Capco shareholders.
Capco’s world-class estate, strong balance sheet and significant financial flexibility ensure that the
Company is well positioned. Whilst we can expect continued market uncertainty in the near term,
we are confident about the long-term fundamentals and prospects for the West End and prime
central London.”
Investment structure and shareholder approval
The acquisition of 64.4 million shares for £348 million in cash, representing 20.9% of Shaftesbury’s
shares, is expected to complete on 3 June 2020. A subsequent tranche of 16.3 million shares for
£88 million in cash, representing 5.3% of Shaftesbury’s shares, constitutes a Class 1 transaction
for the purposes of the FCA Listing Rules. Completion of the second tranche is therefore conditional
on Capco shareholder approval. A circular will be sent to Capco shareholders in due course.
Background to and strategic rationale for the Investment
Capco is positioned as a strongly capitalised prime central London REIT centred around its world-
class Covent Garden estate. Capco entered 2020 looking forward to the next phase of growth for
the business from a position of financial strength.
Whilst COVID-19 has had a significant impact on the Group’s customers and business in the near
term, the Capco Board continues to believe in the resilience and long-term fundamentals of prime
central London and in particular the West End.
The Investment represents a unique opportunity to acquire a significant stake in an exceptional
mixed-use real estate portfolio.
Similar to Capco’s world-class estate at Covent Garden, Shaftesbury’s portfolio in the heart of
London’s West End has been characterised by careful strategic assembly and creative asset
management over time.
Sizeable stakes in such portfolios in central London are rarely available and the Investment
represents a unique opportunity.
Attractive investment and entry price relative to historic levels and the Board’s view of the
future long-term prospects for prime central London
Whilst the impact of COVID-19 has put downward pressure on share prices and the likely trajectory
of property valuation levels across the central London real estate sector, the price paid represents:
• A discount of 44.9% versus Shaftesbury’s last 12 month share price high of 979.5 pence on
23 October 2019
• A discount of 45.0% versus Shaftesbury’s last reported EPRA NAV per share of 982 pence
as at 30 September 2019
The Board believes the Investment is at an attractive valuation, with an implied price of
approximately £1,200 per square foot and a yield of 3.3% based on Shaftesbury’s 2019 total
dividend of 17.7 pence per share.
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Consistent with Capco’s strategy to invest in attractive opportunities on or near the Covent
Garden estate
The Group continues to maintain a disciplined approach to capital allocation, assessing the merits
of all capital decisions including investment in owned assets, development and repositioning
opportunities, accretive acquisitions on or near the Covent Garden estate, disposal of non-strategic
assets and the return of surplus capital to shareholders as appropriate.
The Investment is consistent with this strategy, and Capco’s deployment of capital to date, to grow
its central London property investment business, centred around the Covent Garden estate.
Shaftesbury’s portfolio is one which Capco has a strong appreciation for based on the Capco
management team’s own track record and experience of operating a prime central London real
estate portfolio.
Capco maintains a strong balance sheet with access to significant liquidity
As set out in the Company’s COVID-19 update on 26 March 2020, total Group cash was
approximately £250 million with a further £120 million of deferred consideration to be received from
the Earls Court sale, of which £105 million will be at the end of 2020 and £15 million in December
2021.
The Investment is being funded fully through the £705 million Covent Garden revolving credit
facility, of which £255 million remains available for drawdown.
Based on the Group’s net debt as at 31 March 2020 and the carrying value of the Group’s property
portfolio as at 31 December 2019 and assuming payment of the total consideration of £436 million,
Capco’s loan to value ratio (“LTV”) would be 30% and cash and undrawn committed facilities would
be £525 million. In addition there is a further £120 million of proceeds from the sale of Earls Court
to be received.
The Investment will be reported as an equity investment in the Group’s financial statements.
Given the capital deployed towards the Investment, the Board has decided not to complete the
return of £100 million to shareholders through the share buyback programme announced earlier
this year, under which £12 million had been returned to shareholders prior to being suspended in
March 2020.
Further details on the Investment
On 30 May 2020, Capco and PEL (UK) Limited, Orosi (UK) Limited and Orosi (UK) 2 Limited (the
"Sellers") (which are each indirectly owned by Veloqx (Jersey) Limited as trustee of the Veloqx
settlement (a discretionary trust established by Samuel Tak Lee for the benefit of himself and his
immediate family)) entered into a sale and purchase agreement in relation to 64.4 million shares,
representing 20.9% of Shaftesbury shares (the "First SPA"), constituting a Class 2 transaction for
the purposes of the FCA Listing Rules. The consideration under the First SPA will be satisfied at
completion by a payment in cash to the Sellers of £348 million.
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On 30 May 2020, Capco and the Sellers also entered into a second sale and purchase agreement
in relation to 16.3 million shares, representing 5.3% of Shaftesbury shares (the "Second SPA"),
constituting a Class 1 transaction, as a result of the aggregation with the transaction effected under
the First SPA, for the purposes of the FCA Listing Rules. Completion of the transaction under the
Second SPA is subject to and can only occur upon satisfaction of a Capco shareholder approval
condition. The consideration under the Second SPA will be satisfied at completion by a payment in
cash to the Sellers of £88 million. The transaction under the Second SPA will not proceed to
completion if the shareholder approval condition is not satisfied on or before the date which is twelve
weeks after the date of the Second SPA and it will automatically terminate. Subject to satisfaction
of the condition, completion of the Second SPA is anticipated to occur by the end of August 2020.
Rothschild & Co is acting as lead financial adviser and sponsor to Capco on the transaction. BofA
Securities is acting as financial adviser and corporate broker to Capco on the transaction.
The person responsible for arranging the release of this announcement is Leigh McCaveny, Acting
Company Secretary.
Enquiries:
Capital & Counties Properties PLC
Ian Hawksworth Chief Executive +44 (0)20 3214 9188
Situl Jobanputra Chief Financial Officer +44 (0)20 3214 9183
Sarah Corbett Head of Investor Relations +44 (0)20 3214 9165
Media enquiries
UK: Hudson Sandler Michael Sandler +44 (0)20 7796 4133
SA: Instinctif Frederic Cornet +27 (0)11 447 3030
Rothschild & Co +44 (0)20 7280 5000
Alex Midgen
Peter Everest
BofA Securities +44 (0)20 7628 1000
Simon Mackenzie Smith
Edward Peel
David Lloyd
JSE Sponsor:
Merrill Lynch South Africa (Pty) Limited
About Capital & Counties Properties PLC (“Capco”)
Capital & Counties Properties PLC is one of the largest listed property investment companies in
central London and is a constituent of the FTSE-250 Index. Capco’s landmark estate at Covent
Garden was valued at £2.6 billion (as at 31 December 2019) where its ownership comprises over
1.2 million square feet of lettable space. The Company is listed on the London Stock Exchange and
the Johannesburg Stock Exchange. www.capitalandcounties.com
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About Shaftesbury PLC
Shaftesbury is a Real Estate Investment Trust with a portfolio of real estate assets in London’s
West End. Focused on food, beverage, retail and leisure, its portfolio is clustered mainly in
Carnaby, Seven Dials and Chinatown, but also includes substantial ownerships in East and West
Covent Garden, Soho and Fitzrovia.
Extending to 15.2 acres, the portfolio, comprises 607 restaurants, cafés, pubs and shops,
extending to 1.1 million sq. ft., 0.4 million sq. ft. of offices and 610 apartments. In addition,
Shaftesbury holds a 50% interest in the Longmartin Joint Venture, which has a long leasehold
interest, extending to 1.9 acres, in St Martin's Courtyard in Covent Garden.
For the financial year ended 30 September 2019, Shaftesbury reported net rental income of £98.0
million and profit before tax of £26.0 million, with year-end total assets and a portfolio valuation,
including its share of the Longmartin Joint Venture, of £4.0 billion.
IMPORTANT NOTICE
The contents of this announcement have been prepared by and are the sole responsibility of Capco.
No statement in this announcement is intended as a profit forecast and no statement in this announcement
should be interpreted to mean that (i) the future earnings per share, profits, margins or cash flows of Capco
will necessarily match or be greater than the historical published earnings per share, profits, margins or
cash flows of Capco; or (ii) that Capco endorses the equity research analyst consensus referred to herein.
N.M. Rothschild & Sons Limited ("Rothschild & Co"), which is authorised and regulated by the Financial
Conduct Authority in the United Kingdom, is acting exclusively for Capco and for no one else in connection
with the subject matter of this announcement and will not be responsible to anyone other than Capco for
providing the protections afforded to its clients or for providing advice in connection with the subject matter
of this announcement.
Merrill Lynch International (“BofA Securities”), a subsidiary of Bank of America Corporation, is acting
exclusively for Capco in connection with the matters set out in this announcement and for no one else and
will not be responsible to anyone other than Capco for providing the protections afforded to its clients or for
providing advice in relation to the matters set out in this announcement.
This announcement may include statements that are, or may be deemed to be, "forward-looking
statements". These forward-looking statements may be identified by the use of forward-looking terminology,
including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may",
"will" or "should" or, in each case, their negative or other variations or comparable terminology, or by
discussions of strategy, plans, objectives, goals, future events or intentions. Forward-looking statements
may and often do differ materially from actual results. Any forward-looking statements reflect Capco's
current view with respect to future events and are subject to risks relating to future events and other risks,
uncertainties and assumptions relating to Capco's business, results of operations, financial position,
liquidity, prospects, growth and strategies. Forward-looking statements speak only as of the date they are
made.
Such forward-looking statements are based on beliefs, expectations and assumptions of the Capco Board
and other members of senior management regarding Capco's present and future business strategies, the
timetable for the Investment, the benefits to be derived from the Investment and the environment in which
Capco and/or Shaftesbury will operate in the future. Although the Capco Board and other members of
senior management believe that these beliefs and assumptions are reasonable, by their nature, forward-
looking statements involve risks and uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future or are beyond Capco's control. Capco and/or
Shaftesbury's actual operating results, financial condition, dividend policy and the development of the
industry in which they operate may differ materially from the impression created by the forward-looking
statements contained in this announcement. In addition, even if the operating results, financial condition
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and dividend policy of Capco and/or Shaftesbury, and the development of the industry in which they
operate, are consistent with the forward-looking statements contained in this announcement, those results
or developments may not be indicative of results or developments in subsequent periods.
You are advised to read this announcement and any circular (when published) in their entirety for a further
discussion of the factors that could affect Capco and/or Shaftesbury's future performance. In light of these
risks, uncertainties and assumptions, the events described in the forward-looking statements in this
announcement may not occur.
This announcement does not constitute, and should not be construed as, an offer to purchase or sell or
issue securities, or otherwise constitute an inducement, invitation, commitment, solicitation or
recommendation to any person to purchase, subscribe for, or otherwise acquire securities in Capco or any
of its affiliates, or constitute an inducement to enter into any investment activity in any jurisdiction. Nothing
contained in this announcement is intended to, nor shall it, form the basis of, or be relied on in connection
with, any contract or commitment whatsoever and, in particular, must not be used in making any investment
decision.
Certain data in this announcement, including financial information, has been rounded. As a result of the
rounding, the totals of data presented in this announcement may vary slightly from the actual arithmetic
totals of such data.
Neither the content of Capco's website (or any other website) nor any website accessible by hyperlinks on
Capco's website (or any other website) is incorporated in, or forms part of, this announcement.
Save as required by the Market Abuse Regulation, the Disclosure Guidance and Transparency Rules, the
Listing Rules or by applicable law, each of Capco, BofA Securities, Rothschild & Co and their respective
affiliates expressly disclaims any intention, obligation or undertaking to update, review or revise any of the
information or the conclusions contained herein, including forward looking or other statements contained in
this announcement, or to correct any inaccuracies which may become apparent whether as a result of new
information, future developments or otherwise
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Date: 01-06-2020 08:00:00
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