The 5 Things You Need To Know About Blackstone’s £1.2B St. Modwen Takeover Offer
On Friday, the board of listed developer St. Modwen revealed that it had received a provisional takeover offer from Blackstone and that if a firm offer was made, it would advise shareholders to accept the deal.
Here’s everything you need to know about the biggest piece of UK listed real estate M&A since before the downturn, including the fact that the course toward this particular marriage may not run smoothly …
This Is What Blackstone Wants To Buy …
St. Modwen is a developer in three parts: a logistics company that delivered 1.5M SF of new space in 2020 and has a 19M SF pipeline in the super-hot sector; a housebuilder that delivered 950 new homes last year and wants to up that to 1,500 a year; and a strategic land company that owns a landbank of about £200M. It is split 50%, 28%, 22% between those three sectors.
… And This Is What It Is Willing To Pay
Blackstone has offered 542p a share for St. Modwen, valuing the company at about £1.2B. That price is a 21% premium to the company’s share price before the bid was announced, a 37% premium to its average share price for the six months before the bid and a 24% premium to its net tangible assets.
But Hang On A Minute
Despite all those premiums, one of St. Modwen’s biggest shareholders and some analysts have come out against the offer. Fund manager JO Hambro owns 9% of the company, and the firm told Bloomberg that St. Modwen’s strategy would see it create returns “well in excess of the potential offer” and that it would not support the current bid. That 542p is higher than the 530p at which St. Modwen’s shares traded before the coronavirus pandemic hit, but the company’s price had been tracking up and to the right steadily for years. Peel Hunt said the premium offered represents only three years of growth.
The Potential Strategy
Everyone knows that Blackstone hearts logistics, so the appeal of a 19M SF pipeline, which Peel Hunt called “irreplaceable,” is clear, and building it out would create strong returns. St. Modwen has already said it wants to sell off its strategic land business over the next few years, and JO Hambro suggested it could do the same with the house building arm and become a pure logistics specialist — it argued that the incongruous mix of unrelated assets had led to the company being undervalued by stock market investors.
The New Guy At The Top Isn’t Hanging Around
It would be understandable if a new chief exec coming in to a company wanted to have a chance to make his mark at the firm. Not so Sarwjit Sambhi. He was announced as St. Modwen CEO in September, started the job in November and has agreed to sell the company in May. No rejecting offers just to hang around and draw a juicy salary there.