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Shaftesbury and Capital & Counties merger agreed

Capco eyes takeover of Shaftesbury

Capital & Counties (CAPC) and Shaftesbury have reached an agreement on a £3.5bn all-share merger.

The merger of the two West End of London landlords, which will be called Shaftesbury Capital Plc, had been rumoured for years and it was confirmed last month that talks were taking place. Under the terms of the proposed merger each Shaftesbury share will receive 3.356 new CAPC shares.

The combined group’s portfolio will be valued at around £5.0bn, with annualised gross income of £165.5m and an estimated rental value (ERV) of £218.0m as at 31 March 2022.

The portfolio will comprise 670 properties with 2.9m square feet of lettable space across 2,000 commercial and residential units across Covent Garden, Carnaby, Chinatown and Soho. At 31 March 2022, the combined group’s portfolio comprised:

  • retail: 35% (£1.7bn) of the portfolio value;
  • hospitality and leisure: 34% (£1.7bn) of the portfolio value; and
  • offices and residential: 31% (£1.6bn) of the portfolio value (split as 14% residential and 17% offices).

Financial impact of merger

The group will have an estimated EPRA NTA of £3.8bn and EPRA NTA per share of 207 pence as at 31 March 2022.

Efficiencies in the combined group’s operating structure are expected to generate £12m of pre-tax recurring cost synergies on an annual run-rate basis by the end of the second full year following completion.

For CAPC shareholders, the merger is expected to be earnings accretive immediately and modestly EPRA NTA dilutive, while for Shaftesbury shareholders, it is expected to be immediately EPRA NTA accretive and modestly earnings dilutive for the first two full years after completion while the synergies are being realised. 

The combined group will have an estimated loan-to-value (LTV) of 29% as at 31 March 2022 and is expected to have £500m of available liquidity immediately following completion.

CAPC has entered into a £576m loan to provide funding certainty in the event that the Shaftesbury Mortgage Bond holders exercise their redemption right following completion. Based on current market conditions, any drawdown of the loan, or restructuring or refinancing of the Shaftesbury Mortgage Bonds is expected to result in increased financing costs for the combined group. 

The combined group will retain a tax-efficient REIT structure and as such, will be required to distribute a minimum of 90% of rental profits, and is expected to adopt a progressive dividend policy.

Leadership team

The company will be led by Jonathan Nicholls as non-executive chairman and Ian Hawksworth as chief executive. Situl Jobanputra will be the chief financial officer and Chris Ward will be the chief operating officer.

The board will contain representation from both companies, with four current Shaftesbury directors, being Richard Akers (as the Senior Independent Director), Jennelle Tilling, Ruth Anderson CVO and Helena Coles, and two current CAPC directors, being Charlotte Boyle and Anthony Steains.

An executive committee, which will be responsible for the day-to-day management and operation, will be established comprising six members. The chief executive, chief financial officer and chief operating officer will be joined by CAPCs Michelle McGrath, responsible for the enlarged Covent Garden portfolio; Shaftesbury’s Andrew Price responsible for the Carnaby, Chinatown, Soho and Fitzrovia portfolios; and Shaftesburys Samantha Bain-Mollison responsible for leasing.

After 36 years at Shaftesbury, including 11 as chief executive, Brian Bickell will retire on completion. Executive directors Simon Quayle and Tom Welton, who have been with Shaftesbury for 35 and 33 years respectively, will also leave the business on completion.

Henry Staunton, CAPC’s chairman who has served on the board for 12 years, will also retire on completion.


Shareholders of both companies will have to approve the merger, with general meetings being set up.

Norges Bank (the Central Bank of Norway), which is a substantial shareholder of both CAPC and Shaftesbury, has irrevocably undertaken to vote in favour of the merger, and Madison International Realty Holdings, a shareholder of CAPC, which has also provided a letter of intent to vote in favour. 

When taken together with the irrevocable undertakings provided by Shaftesbury’s and CAPC’s directors, this represents total support in aggregate of:

  • 35.3% of the total votes which could be cast by Shaftesbury shareholders; and
  • 19.2% of the total votes which could be cast by CAPC shareholders.

The merger is also subject to the Competition and Markets Authority (CMA) giving it the green light.

SHB : Shaftesbury and Capital & Counties merger agreed

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