Capital & Counties at one-year high amid buyout interest
Shares in UK landlord Capital & Counties (Capco), spun out of SA businessman Donald Gordon’s Liberty International, rose the most since listing in 2010 on Monday, after reports that luxury property developer Candy Ventures was interested in acquiring it.
Capco owns the Covent Garden entertainment complex, as well as a 63% stake in a residential development at Earl’s Court.
While Covent Garden has been a profit driver for Capco, it has seen the value of its developments and projects at Earl’s Court lose value amid uncertainty about the Brexit process.
Capco, which has a market capitalisation of about R40bn on the JSE, plans to split these two businesses into two listed entities but has not said when it expects to complete this plan.
Reuters reported that Candy Ventures was considering an offer for Capco and that brothers Nick and Christian Candy had held talks with Saudi Arabia’s Public Investment Fund about a joint move on Capco.
Capco said on Monday it had noted the reports, but it had not been approached. It said its board had full confidence in the company’s strategy and management to continue to deliver shareholder value.
Capco closed 8.74% higher at R51.50, its best performance since listing.
The company’s outlook has been negatively affected by the uncertainty about Brexit, with its share price slumping 51.71% in 2016. Since the outcome of the Brexit referendum was announced on June 23 2016, Capco’s share price has lost about a third of its value.
Other UK commercial property funds have been under pressure amid how Brexit could affect the values of their assets and the performances of their tenants.
Stanlib senior property fund manager Nesi Chetty said a potential takeover came at a time when retail and development funds in the UK market were under pressure.
“Retail property assets in the UK continue to be cheap, but this is against an uncertain backdrop of Brexit and in some instances dividends either being reduced or not paid,” Chetty said.
The company had announced a plan in July to split in two by separately listing its main estates in London, wanting to list Covent Garden, which had a market value of about £2.6bn (R49bn) at the end of June. Its Earls Court development project would become EC Properties, which was worth £389m (R7.4bn) at the end of June.
Peter Clark, a portfolio manager at Investec Asset Management, said speculation about a takeover of Capco or part of its portfolio had been brewing for a long time.
“There are no further details of what this may look like at this stage, and I would expect momentum to continue building behind the story,” he said.
“The market has long expected some type of M&A for the Earls Court asset where there have been rumoured discussions before, so this is new news that someone is looking at the entire entity,” Clark said.