Workspace Group, the London flexible office provider, has agreed a deal to acquire McKay Securities, the listed property owner focused on offices and industrial in the South East, for £272m.
Under the terms of the acquisition, each McKay shareholder will be entitled to receive 209 pence per share in cash and 0.115 new Workspace shares. On the basis of the closing price per Workspace share of 769 pence on 1 March 2022 the acquisition values each McKay share at 297 pence and the entire issued share capital of McKay at around £272m.
This represents a premium of 33.2% to the closing price of 223 pence per McKay Share on 1 March 2022 and a discount of around 7.0% to McKay’s estimated net tangible assets, adjusted for prepayment costs of a loan, of 326 pence per share at 31 January 2022.
Following completion of the acquisition, existing Workspace shareholders will hold around 95% of the enlarged group and McKay shareholders will hold around 5%.
Rationale for the acquisition
The board of Workspace gave the following rationale:
- Workspace will be a larger and more resilient company with enhanced income and capital growth prospects and gross property assets of £2.9bn, comprising 84% London office, 10% light industrial, 5% South East office and 1% other;
- the acquisition will extend Workspace’s reach into the South East;
- the acquisition will provide the opportunity to unlock corporate and operational synergies;
- the acquisition is expected to be earnings accretive from year two and the Workspace board believes it will enhance earnings and dividend growth over the medium term; and
McKay directors intend to recommend shareholders to vote in favour
The McKay directors consider the terms of the acquisition to be fair and reasonable and intend to recommend unanimously that McKay shareholders vote in favour of the scheme at the Court Meeting and the Resolutions to be proposed at the General Meeting. McKay directors control 298,280 McKay shares in aggregate representing around 0.3% of the company.
Workspace has received irrevocable undertakings and a letter of intent in respect of a total of 33,341,102 McKay shares representing, in aggregate, around 37.0% of McKay’s issued share capital – including Aberforth Partners LLP, which owns 14.9% of McKay shares.
Graham Clemett, chief executive of Workspace, said: “The market for office space is shifting, with businesses prioritising greater flexibility and the right location for their teams. This acquisition is a fantastic opportunity to accelerate our growth plans by capturing more of the strong demand we are seeing for our flexible offer in London, whilst selectively extending our reach into attractive commercial locations in the South East. We will be a larger, more resilient company with an enhanced financial profile, and by applying our proven operational model and expertise, we expect to generate strong returns from McKay’s portfolio of high-quality assets over the medium term.”
Richard Grainger, chair of McKay, said: “The McKay board’s recommendation of the acquisition follows a detailed and rigorous review during which we considered a broad range of options to unlock value for McKay shareholders and which determined Workspace’s proposal to be the most attractive. The offer from Workspace provides McKay shareholders with an opportunity to receive a return which values the business substantially above where it has been trading historically with a substantial proportion of this return payable in cash. It also provides McKay shareholders with the opportunity to participate in the future success of the enlarged and well capitalised Workspace Group, whose business model is well placed to meet post COVID-19 demand for high quality, flexible business space.”
WKP : Workspace agrees deal to buy McKay Securities for £272m