by Alex Catalano
With hardly a shot being fired, P&O have taken over Stock Conversion. SC’s board took only six short days to recommend acceptance of P&O’s “fair and reasonable” offer.
The acquisition is a coup for Sir Jeffrey Sterling, chairman of P&O and no stranger to property development. Last year Sir Jeffrey merged his Sterling Guarantee Trust/Town & City, with P&O. The addition of Stock Conversion means P&O will have over £1bn of property in the UK and abroad.
Stock Conversion have a very good portfolio,” says Sir Jeffrey. “They’re strong in areas where we are weak and vice versa.”
In the 1985 accounts, Stock Conversion’s investment properties were valued at £219.4m. Their portfolio consisted of about 190 properties, mainly in London and Glasgow.
These included a 50% interest in the Euston Centre where British Land are co-owners — ACC House, with 110,000 sq ft in Great Cumberland Place, W1, and Corunna House, a new 52,000-sq ft office building in Cadogan Street, Glasgow.
The company’s development programme features a £25m office scheme for their old Bailey site, adjoining Holborn Viaduct station, and a hi-tech park fronting the A40 in west London.
Last year, Stock Conversion also acquired an option to buy the BBC headquarters in Langham Place, W1, as part of their arrangements for selling their White City stadium site to the BBC. The BBC paid £30m for the site, which Stock Converstion had acquired for £1.6m.
According to Sir Jeffrey, it is “somewhat early” to say what he will do with Stock Conversion. “But it is likely that it will get incorporated into the way we operate.” This would mean splitting the company into different areas. It also seems likely that some of Stock Conversion’s management may stay on.
P&O’s acquisition of Stock Conversion ends more than a year of uncertainty over the company’s future. The death in late 1984 of former chairman Robert Clark, and the subsequent sale of his 22.5% stake to aggressive newcomer Stockley, left Stock Conversion exposed.
Although the management line-up at the company changed and efforts were made to be more communicative, Stock Conversion came under increasing pressure to justify their policies. Takeover bids of Stock Conversion by Stockley, or vice-versa, were discussed, but a formal offer never materialised.
“During the Stockley negotiations the company never felt able to accept any of the proposals as being in the best interest of the shareholders,” said a spokesman for Stock Conversion.
“We never wanted to be involved in a public brawl, but we made it clear that what was on offer was not in the shareholders’ best interest and never would be.”
However, the offer from P&O was a different matter. “There is a great deal of difference between Sir Jeffrey and others,” the spokesman said, not naming names. “Sir Jeffrey is a lot easier to talk to sensibly.”
In fact, P&O already had an indirect stake in Stock Conversion through Stockley. In late 1985 P&O acquired an interest in a 20.8% shareholding in European Ferries. European Ferries, in turn, hold 29.9% of Stockley’s shares, a stake acquired in 1985 when Stockley bought a £61.5m European Ferries’ portfolio, partly with shares.
P&O’s initial offer — a 4 for 3 share exchange or a cash alternative of 676p per share — was called “inadequate in amount and unacceptable in form” by Stock. But a rise in P&O’s share price and a revised cash option of 720p per share allowed Stock to give way gracefully.
The recommended offer values the company at £402m, which gives a net asset value of 768p per share. The Stock Conversion board have said that they believe a full independent valuation of their entire portfolio of properties will show a net asset value “at least equal” to this figure.
