The board of Balanced Commercial Property Trust (BCPT) has recommended a cash offer for the company from Starwood Capital valuing the company at £673.5m.
The cash offer, at 96p per BCPT share, represents a premium of 21.5% to its closing price of 79p per share as at 12 April – the last business day prior to the start of the board strategic review into the future of the company.
Relative to BCPT’s last reported NAV per share of 105.1p as at 30 June, however, the cash consideration represents an 8.7% discount.
Rationale
The announcement said: “Starwood believes that BCPT has a high-quality, attractive and diversified real estate portfolio. At the time the BCPT board commenced the strategic review, BCPT faced significant challenges with a difficult economic and property market backdrop in a higher interest rate environment. BCPT’s shares had traded at an average discount to NAV of 36.3% in the 12 months prior to the commencement of the strategic review.
“Given BCPT’s scale and constrained access to capital, Starwood believes that the full potential of the business is best achieved as a private company under the control of Starwood as this will enable BCPT to realise maximum value from its portfolio.
“On 15 April 2024 the BCPT board announced that it had commenced the strategic review to explore, alongside its advisers, all of the various strategic options available to enhance value for BCPT shareholders. These options included continuation of BCPT with a revised strategy, a managed wind-down of the portfolio and the sale of BCPT’s share capital and/or assets, or a material portion thereof.
“As part of the Strategic Review, BCPT received indications of interest from a number of credible third parties, with 12 interested parties having then submitted indicative proposals following a period of initial due diligence. The BCPT board believed that the pricing of certain initial proposals merited further exploration and, accordingly, shortlisted interested parties were then granted access to diligence meetings with the Investment Manager, as well as additional due diligence materials on BCPT and its portfolio, and were invited to submit revised proposals. As a result of this process, and following extensive negotiation between the parties over the period of the formal sale process, Starwood has put forward a proposal that the BCPT board intends to recommend unanimously.
“In reaching its recommendation of the acquisition, the BCPT board assessed the various strategic options (including a managed wind-down) on the basis of, among other things, quantum delivered to BCPT shareholders (on a net present value basis), timing and relative certainty of execution.
“The BCPT board believes the acquisition enhances value for BCPT shareholders, with the cash consideration representing a material premium to BCPT’s undisturbed share price. The BCPT board believes the acquisition compares favourably to the risk-adjusted returns that may be generated by other strategic options (with the acquisition representing both an acceleration of the timing of returns, and an improvement on the expected net present value, to be delivered pursuant to a managed wind-down).”
Commenting on the acquisition, Paul Marcuse, chairman of BCPT said:
“Over the course of the Strategic Review, we have undertaken an open consultation process with shareholders and the BCPT Board is grateful for the constructive feedback. We note that a significant proportion of the share register expressed to us a clear preference for a liquidity event, either via a sale or a managed wind-down.
“The BCPT Board has explored a range of potential options for the company, including continuation with a revised strategy, a managed wind-down of the portfolio and the partial or full sale of BCPT’s share capital or assets. The BCPT Board is pleased with the interest shown in the company and its portfolio by various credible third parties during the Strategic Review, which represented a range of sources of capital (including UK institutional capital, private equity investors, listed real estate peers and asset managers). The BCPT Board has carefully considered each of the company’s strategic options, benchmarked against the likely returns that could be achieved in a managed wind-down.
“Following careful consideration, and having taken independent third-party advice, we believe that the proposed transaction with Starwood offers a successful outcome for our shareholders, offering a full cash exit at a significant premium to BCPT’s undisturbed share price. We, the BCPT Board, therefore intend to recommend unanimously that BCPT Shareholders support the Acquisition at the Court Meeting and the General Meeting, details of which will follow in due course.”
The proposed purchase will be put to scheme shareholders at the court meeting and BCPT shareholders at a general meeting. The acquisition must be approved by 75% of scheme shareholders during the court meeting, and 75% of trust shareholders during the general meeting.
