The auction of PRS Reit (PRSR) has taken an unexpected turn with the £575m rental properties fund accepting a £646.2m cash bid from pension fund manager Waypoint Asset Management.
This is a surprise given last week’s statement that the board was in talks with private equity giant KKR.
PRS shares jumped 6.1%, or 6.4p, to 111p, below the 115.3p per share offer price. With a 1.1p per share included, Waypoint is offering a total of 116.4p, more than the first offer of 115p per share received from real estate fund manager Long Harbour in June.
However, the fact the shares remain below the offer price indicates scepticism over whether another bidder will emerge despite 19 interested parties being granted to the company’s data room at the start of the year.
Moreover, the deal is priced at a steep 17% discount to the real estate investment trust’s net asset value at 31 December. This will disappoint some who hoped activists Christopher Mills and Robert Naylor would achieve more when they joined the board and launched a strategic review last October.
The offer is subject to further due diligence by Waypoint and a vote by PRS shareholders but if these are paased the transaction is expected to complete by 30 November.
This is a non-binding sales agreement which, while it prevents PRS soliciting other buyers, does not restrict it from engaging with a bidder making an offer for the whole fund. Waypoint will receive a break fee of £5.7m should another firm offer emerge.
Our view
Richard Williams, property analyst at QuotedData, said: “We can only assume the negotiations with KKR were going nowhere, which is disappointing given that the price agreed here (at 115.3p per share after expenses) is a substantial discount to the group’s last reported net asset value (NAV) of 139.6p at December 2024. The agreed price is also only a slight premium to that tabled by Long Harbour a few months ago (albeit that bid was made without funding being secured). Having agreed to a £5.7m break fee (around 1% of market cap), a competing bid for the company would have to surpass the 118.7p mark. Whether KKR (or any other party) is interested at this price remains to be seen.”
