Shaftesbury and Capital & Counties explore possible West End merger

In response to press speculation, the boards of Shaftesbury PLC (Shaftesbury) and Capital & Counties Properties PLC (Capco) have confirmed that they are in advanced discussions regarding a possible all-share merger of the two companies.

The merger would create a real estate investment trust focused on the West End of London with a portfolio of circa 2.9 million square feet of lettable space located in high-profile destinations including Covent Garden, Carnaby, Chinatown and Soho.

The combined ownership would comprise circa 1.8 million square feet of retail and hospitality space, together with office and residential accommodation of circa 1.1 million square feet.

Under the proposed terms, it is envisaged that Shaftesbury shareholders, excluding the Shaftesbury shareholding owned by Capco, will own 53% of the combined company, and Capco shareholders will own 47% of the combined company.

Capco currently owns around 97 million shares in Shaftesbury, representing approximately 25.2% of the existing share capital of Shaftesbury, including the circle 38 million shares currently held as security for Capco’s exchangeable bond.

The combined company would have a clear governance and leadership structure, led by Jonathan Nicholls as chairman and Ian Hawksworth as CEO. Situl Jobanputra will be the CFO and Chris Ward will be the COO. The Board will contain strong non-executive representation from both companies, with Richard Akers as the senior independent director.

An executive committee, containing equal representation from the existing Shaftesbury and Capco leadership teams, would be responsible for the day-to-day management and operation of the combined company, with Capco’s Michelle McGrath responsible for the combined Covent Garden portfolio, and Shaftesbury’s Andrew Price responsible for the Carnaby, Chinatown and Soho portfolio and Samantha Bain-Mollison for group leasing.

After 36 years at Shaftesbury, including 11 years as CEO, Brian Bickell would be set to retire on completion of the transaction. Executive directors Simon Quayle and Tom Welton, who have also been with the company for over 30 years, would also leave the business. Henry Staunton, chairman, and Jonathan Lane, non-executive director, would retire from the Board of Capco on completion.

Norges Bank, a major shareholder in both Shaftesbury and Capco, understands the strategic rationale and has signalled its support for the two companies to explore a merger and, subject to review of the final terms and conditions of any transaction, expressed its willingness in principle to support a combination in due course.

Discussions are ongoing and the full terms of the possible merger have not been finalised.

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