News

Derwent Valley secures LMS deal

News

Jonathan Russell

18 November 2006

LMS sale creates a combined property portfolio of £2.25bn and 5.6m sq ft

Derwent Valley outbid Great Portland Estates to buy London Merchant Securities, creating the UK’s largest specialist London office property company.

Sources close to the deal said the Derwent Valley offer, at almost £3 per share, was considerably higher than the price GPE was prepared to pay, although LMS denied the deal was done on price alone.

The deal values LMS at £1bn. The company’s most recent valuation, at 31 March, showed net assets of £893.9m.

Robbie Rayne, LMS’s chief executive and chairman-designate of the combined company to be called Derwent London said: “Price was not the determining factor. If it was, we would have auctioned the company. We would have done a cash sale to a big player.”

Under the terms of the deal, Derwent Valley will pay up to 20% of the purchase price in cash at £2.80 per share, with the remainder funded through a share swap representing a value of £2.98 per LMS share. The price represents a 24% premium against the share price on

29 September, the day before LMS said it was in merger talks.

The two companies will have a combined property portfolio worth £2.25bn, covering 5.6m sq ft, made up mostly of offices, with 61% of its portfolio by value located in London’s West End. Derwent London’s development pipeline will be 5.2m sq ft.

On completion of the deal, John Burns, managing director of Derwent, will become chief executive and lead the Derwent London Group. John Ivey, currently chairman of Derwent, will become deputy chairman; and Robbie Rayne will become chairman of Derwent London.

Nick Friedlos, LMS’s finance director, will join the board as an executive, while Simon Silver, currently Derwent’s head of development, will become head of development of the Derwent London Group.

Rayne will stay with the new company for at least three years. “John will be running the company. I hope to participate in a modest way,” he said. “As the joint company becomes solidified, it will take less of my time and have its own momentum.”

The LMS team will move into Derwent Valley’s headquarters on Savile Row, W1.

LMS sale creates a combined property portfolio of £2.25bn and 5.6m sq ft Derwent Valley outbid Great Portland Estates to buy London Merchant Securities, creating the UK’s largest specialist London office property company. Sources close to the deal said the Derwent Valley offer, at almost £3 per share, was considerably higher than the price GPE was prepared to pay, although LMS denied the deal was done on price alone. The deal values LMS at £1bn. The company’s most recent valuation, at 31 March, showed net assets of £893.9m. Robbie Rayne, LMS’s chief executive and chairman-designate of the combined company to be called Derwent London said: “Price was not the determining factor. If it was, we would have auctioned the company. We would have done a cash sale to a big player.” Under the terms of the deal, Derwent Valley will pay up to 20% of the purchase price in cash at £2.80 per share, with the remainder funded through a share swap representing a value of £2.98 per LMS share. The price represents a 24% premium against the share price on 29 September, the day before LMS said it was in merger talks. The two companies will have a combined property portfolio worth £2.25bn, covering 5.6m sq ft, made up mostly of offices, with 61% of its portfolio by value located in London’s West End. Derwent London’s development pipeline will be 5.2m sq ft. On completion of the deal, John Burns, managing director of Derwent, will become chief executive and lead the Derwent London Group. John Ivey, currently chairman of Derwent, will become deputy chairman; and Robbie Rayne will become chairman of Derwent London. Nick Friedlos, LMS’s finance director, will join the board as an executive, while Simon Silver, currently Derwent’s head of development, will become head of development of the Derwent London Group. Rayne will stay with the new company for at least three years. “John will be running the company. I hope to participate in a modest way,” he said. “As the joint company becomes solidified, it will take less of my time and have its own momentum.” The LMS team will move into Derwent Valley’s headquarters on Savile Row, W1.