A major shareholder in St Modwen Properties said a boosted takeover bid for the company by Blackstone is a vindication of its view that the first offer “sold all shareholders short”.
JO Hambro Capital Management, which owns a 9% stake in St Modwen through its JOHCM UK Dynamic Fund and advised accounts, described Blackstone’s recommended £1.24bn bid for the company last month as undervaluing the business. St Modwen’s shares traded consistently higher than the original offer in the weeks since.
Today, Blackstone and St Modwen announced a higher recommended offer of 560p a share versus 542p, valuing the company at £1.27m.
Alex Savvides, senior fund manager for JOHCM UK Dynamic Fund (pictured), said the raised offer “is a begrudging acceptance by Blackstone that it is underpaying for this asset”. He added that the increase of “just £40m extra” equals “roughly one year of St Modwen’s EBIT”. The fund will nonetheless accept the raised offer.
“The increase is based on fact: that the St Modwen’s logistics portfolio is highly attractive, performing well and undervalued,” Savvides said. “Meanwhile St Modwen Homes grows quietly bigger, broader and more valuable. It is noteworthy that today peer Crest Nicholson, which we also hold in the JOHCM UK Dynamic portfolio, upped its earnings guidance, the latest in a string of positive trading statements from the UK house building sector.”
Savvides noted that the raised offer’s 21.1% premium to net tangible assets as of 31 May is now lower than the original offer’s 23.8% premium to 2020 NTA.
“But given the board’s willingness to sell, its offer acceptance from the start and with no other major shareholder prepared to support our stance publicly, it was always going to be a difficult battle to fight,” he added. “That we got any increase at all is a win for shareholder stewardship, engagement and activism. That is what the JOHCM UK Dynamic strategy stands for and that is what we will continue to do.”
In confirming its plan to accept the offer, JO Hambro joins institutional investors including Aviva Investors and Aberdeen Standard Investments that have said they will back the take-private.
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