West End hosts Capco and Shaftesbury in talks over £3.5 billion merger | Business Newsletter

The two companies behind London’s massive West End complex are in advanced talks over a £3.5 billion merger that would unite world-famous tourist attractions, including Covent Garden and Chinatown under common ownership.

Sky News has learned that Capital & Counties Properties – also known as Capco – and Shaftesbury are discussing details of an all-share partnership that could be announced within weeks.

If completed, the merger would bring together two of London’s most prominent landowners, creating a powerhouse in property rights in the West End as the capital strives for a successful future after epidemic.

Capco owns the shops and restaurants in Covent Garden, while Shaftesbury owns a host of other major landmarks in central London, such as Carnaby Street, Chinatown and Seven Dials.

Speculation about a tie-up between the two companies has persisted since May 2020, when Capco bought a 26% stake in property magnate Samuel Tak Lee in Shaftesbury for £436 million.

One analyst says that Norges Bank, Norway’s sovereign wealth fund, is likely to be an instrument in the merger, given its large stakes in both Capco and Shaftesbury.

Both Capco and Shaftesbury were hit hard by Coronavirus pandemic, with the second raising around £300m from a share sale in autumn 2020.

Capco entered that cash call on a pro-rate basis, allowing it to maintain its holdings.

The Covent Garden owner lost more than a quarter of its value in 2020, reflecting a sharp drop in visitor numbers in the early stages of the year. COVID-19 crisis.

Many commercial property owners were forced to step in to provide rent to retailers and hospitality businesses two years ago, with dozens of popular chain stores and restaurants collapsing.

Among the casualties suffered by the administration or implementation of restructuring plans by creditors including homeowners were Debenhams, TopShop, Carluccio’s and Prezzo.

In recent months, however, homeowners have taken a more upbeat tone, despite the uncertainties caused by the Omicron variant and the shift to hybrid work.

Shaftesbury said in February that its vacancy rate had fallen below 5% for the first time since the pandemic broke out.

Ian Hawksworth, Capco CEO, said in the same month that the outlook had turned more positive.

“We are pleased with the level of strong rental demand for Covent Garden, which contributed to the increase in value in the second half of the year.

He adds: “With continued growth, customer sales hitting 2019 levels and our innovative approach, Covent Garden is the most vibrant neighborhood in the West End and is conveniently located. for further rent growth”.

On Friday, Capco shares closed nearly 3% higher amid speculation that Capco could be a takeover target by an unnamed suitor.

The increase leaves Capco with a market capitalization of around £1.37 billion.

Meanwhile, Shaftesbury closed 1% lower at 577p, giving it a market value of £2.23billion.

Other details about the proposed merger structure, including the future leadership of the combined group, remained unclear as of Saturday morning.

However, both companies are likely to be forced to confirm talks with the London Stock Exchange when it opens on Monday.

Mr Hawksworth and his Shaftesbury counterpart, Brian Bickell, are both respected figures in the commercial real estate sector, although it is unlikely that the two will remain in a combined group.

There could also be significant cost synergies from the agreement.

Capco’s history dates back to the 1930s, although it wasn’t until 2006 when it acquired Covent Garden’s Piazza, while Shatesbury, which owns 16 acres in the West End, was founded in 1985, is famous in London the following year.

Capco is understood to be being advised by bankers at Rothschild, while Blackdown Partners and Evercore Partners are advising Shaftesbury.

Shaftesbury declined to comment, while Capco has been contacted for comment.