by Sam Benstead from interactive investor, 7th July 2023:
An outside investor has purchased struggling real estate investment trust (REIT) Civitas Social Housing at a large discount, stripping investors of about 25% of the value of the business.
The CSH board accepted Hong Kong-based CKA Group’s 80p a share, £485 million cash offer, which values it at 27% below the latest net asset value (NAV) estimate of 111p. The offer was made in May but accepted this week due to backing by other shareholders.
CKA Group, via its subsidiary CK Bidco, now has more than 75% of the voting rights of CSH, according to a stock market filing this week. It said that it will now apply to the Financial Conduct Authority (FCA) and London Stock Exchange to cancel the listing of Civitas shares. It expects the shares to delist on 4 August 2023.
CKA owns 17% of the shares but support from the board for the deal and other large investors meant that it has the backing of 89% of the share count for the takeover deal.
Shares in the trust soared 50% on the news to trade at around the 80p deal price, but that does not mean shareholders will be happy.
James Carthew, head of investment company research and an investor in the trust, told media group Citywire that it was an “extremely disappointing” development.
“Effectively, they [the large shareholders] handed the bidder up to £175 million of value, assuming it can buy the remainder at the same price, without putting up a fight. I’m not sure how they can justify that to their underlying customers,” he said.
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