Land Securities (LAND) has agreed terms of a recommended all cash offer for U and I Group (UAI), valuing the company at £190m.
Under the terms of the acquisition, UAI shareholders will be entitled to receive 149p per share, which is a mammoth 73% premium to the closing price of 86.0p on 29 October 2021. The price is a discount of 8.6% to its basic NAV, calculated at 31 March 2021.
The all cash offer for UAI is by Landsec Development, a newly formed wholly-owned indirect subsidiary of Land Securities, and is unanimously recommended by the board of UAI.
In a statement, LAND said the acquisition “recognises the value from combining U+I’s front-end development capabilities, placemaking skills and portfolio of core regeneration projects which require funding, with Landsec’s development expertise and strong balance sheet”.
It added: “Landsec set out a strategy in October 2020 to recycle investment in order to drive growth and generate higher returns, including through urban opportunities in London and other major regional cities. The acquisition accelerates that strategy, adding an attractive pipeline of mixed-use urban development opportunities along with complementary skills and expertise.
“U+I provides access to a significant pipeline of mixed-use development schemes, of which two are well-progressed through planning (Mayfield in Manchester and Morden Wharf, Greenwich Peninsula) and in respect of which Landsec believes that it can accelerate the pace of development.
“U+I also provides access to a further high quality, office-led development in London (Landmark Court, Southwark) with planning consent. In addition, there is a strong alignment of cultures between the two companies, with a focus on developing sustainable communities in the interests of broader stakeholders.”
LAND has received letters of intent to vote in favour of the acquisition from Aberforth Partners LLP, J O Hambro Capital Management Limited, Jupiter Asset Management Limited and Ennismore Fund Management Limited, which combined total 39,754,171 of U+I Shares, or around 32% of the issued capital. With the shares owned by U+I directors, the deal has the backing of around 35% of the share capital of U+I.
Background behind the deal
In October 2020, LAND set out its future growth strategy focused on three key areas: Central London offices; major retail destinations; and urban development opportunities in London and other major regional cities. The goal of the strategy was to accelerate growth through recycling capital into higher return opportunities and deliver attractive income and growth returns.
It believes the acquisition would add core regeneration assets to its development pipeline and enhance the group’s placemaking skills. It said U+I aligned closely with its sustainability goals, including the design and development of new sustainable communities.
It added U+I provides access to a significant pipeline of mixed-use development schemes, of which two are well-progressed through planning.
- Mayfield, Manchester, is one of the UK’s pre-eminent mixed-use regeneration projects, and works have already commenced onsite. It is a 24 acre site in Manchester city centre, adjacent to Manchester Piccadilly railway station, which comprises around 2m sq ft of office, retail and leisure space and 1,500 new homes set around a 6.5 acre public park. This site is currently owned in a joint venture with Manchester City Council, Transport for Greater Manchester and London and Continental Railways. U+I has a 50% share and acts as development manager for the site.
- Morden Wharf, Greenwich Peninsula, where U+I has a conditional development agreement with Morden College, a charitable trust with significant land holdings on the Greenwich Peninsula. U+I has achieved a resolution to grant planning consent for 1,500 new homes, 200,000 sq ft of warehouses and 50,000 sq. ft. of retail across this 19 acre site on the western edge of the Peninsula.
U+I also provides access to a further high quality, office-led development in London with planning consent:
- Landmark Court, Southwark, which has planning permission for 200,000 sq ft of offices, retail and workspace and 36 new homes. Landmark Court will sit in a joint venture (which is conditional on receipt of development funding) with Transport for London, held 51:49 respectively. TfL and Network Rail are freeholders of the site, with a new 299-year lease now agreed for development.
LAND said it believes that it can accelerate the pace of development across these sites by combining Landsec’s own development capabilities and the strength of its balance sheet, with U+I’s placemaking skills.
LAND said these opportunities would enable it to invest £600-800m in development capital expenditure in the short to medium term.
U+I also provides access to a longer dated mixed-use regeneration scheme (Cambridge Northern Fringe East), which LAND’s directors believe could provide additional upside, and one further mixed-use regeneration scheme (8 Albert Embankment, in London).
[QD view: The deal feels like a no-brainer for UAI shareholders. The company has struggled to find the capital to progress these development projects with its share price languishing at a 55% discount to basic NAV for an extended period of time. For LAND shareholders, it is securing development opportunities that can provide significant returns in the medium term.]
LAND : Land Securities agrees to buy U an I Group for £190m