British Land (BL) is close to acquiring Aberdeen Property Investors.
The UK’s second-largest property company has this week been granted a period of exclusive negotiations with Aberdeen Asset Management (AAM), API’s parent.
British Land is expected to pay around £85m for API.
The move will add a new line to BL’s business, as well as bringing in some high-level managers – API chief executive Iain Reid and UK head David Hunter.
API has £5bn of assets under management, compared with BL’s £9.3bn, £7.6bn of which are wholly owned.
And, although the API purchase price is small compared with BL’s portfolio, it could signal changes to the way the company works.
This week, a Merrill Lynch report expressed concern that trying to run the two businesses side by side would lead to conflicts of interest between BL and Aberdeen’s clients.
However, analysts Alec Pelmore and Robert Fowlds speculated: “What if API could be used as the vehicle to provide value for BL shareholders?”
They said BL could sell its main assets into funds created by Aberdeen and return cash to shareholders.
This would enable BL to exploit its property skills in a similar manner to Pillar, rather than being an “asset accumulator”.
The addition of a fund management and creation business would also give BL a head start if the Treasury’s new enthusiasm for tax-transparent securitised property vehicles leads to listed unit trusts rather than REIT-style vehicles.
AAM announced in November that it would dispose of a majority stake in API through flotation on the London Stock Exchange, but interest from trade bidders made it change its plans.
It was forced into the sale after its share price slumped.
Earlier this month, it said it was in talks with a “handful” of bidders and expected to complete a deal by the end of June. Neither BL nor AAM would comment.
References: EGi News 27/05/03
