Lone Star Funds has agreed terms to buy London-listed Quintain Estates and Development for around £700m.
The US private equity giant has agreed to pay 131p per share for the developer behind the transformation of Wembley – a 22.4% premium to its closing share price of 107p on 28 July.
The price reflects a 7.4% premium to Quintain’s 122p NAV per share as of 31 March this year and comes after a several weeks of discussions between the parties.
Quintain’s board of directors has recommended shareholders accept the offer, which chairman William Rucker said “enabled shareholders to accelerate and de-risk the realisation of value and recognises the transformation of Quintain over the last six years”.
Quintain, which was founded in 1992 and listed four years later, is principally focused on the regeneration of a huge area around Wembley in north-west London which includes a substantial residential element as well as its outlet mall and Wembley Arena.
The company sold out its other major London interest at Greenwich Peninsula to Hong Kong’s Knight Dragon in 2013 and under the leadership of chief executive Maxwell James, who joined the company three years ago, has shifted its focus back onto smaller central London development opportunities as well as the giant Wembley project.
For Lone Star the acquisition would offer an opportunity to focus more on hard asset development in order to hit its ambitious return targets after opportunities its preferred non-performing loan market have become more scarce.
Lone Star principal Angus Dodd said: “The proposed acquisition represents a unique opportunity for Lone Star to gain further exposure to residential and commercial assets in London.
“Wembley Park is one of the largest and most exciting urban renewal projects in Europe and complements our experience in this segment of the market. We intend to contribute significant additional financial resources to help Quintain in its next phase of growth: to accelerate delivery at Wembley Park, building more homes more quickly and continuing the creation of a cohesive and exciting new community. We very much look forward to working with the Quintain team on Wembley and the rest of the portfolio.”
Last year, Lone Star obtained control of the Two Fifty One residential tower in Elephant and Castle, SE1 and it is also backing a large residential development site in Corby, Northamptonshire.
Lone Star is eager to increase its exposure to the London market, as opposed to the large number of generally regional assets it has gained control of through loan portfolios.
The bidco itself – which is known as Bailey Acquisitions – will remain a separate entity within Lone Star’s acquiring fund should the bid be accepted. This means that the specific management team working on Quintain will remain separate and will work on only its projects, whilst Lone Star’s asset manager Hudson will not be involved with the running of the company.
It is expected that some functions of the company that relate specifically to its role as a public company may be downsized if it is delisted. However, it is expected that the senior directors will remain in place.
Wembley is seen by Lone Star as very much the jewel in the crown within Quintain, although the company also includes its fund management arm, WELPUT, which is run by Nigel Kempner.
Quintain has disposed of the majority of its other “non-core” assets, including student housing and regional offices over the last three years.
James said: “Since 2012, Quintain has undergone a major transformation which has seen the business dispose of non-core assets, progressively rebalance the business to focus on London and materially de-gear the balance sheet, creating a strong platform for growth. The offer from the bidco crystallises value for shareholders at an early stage whilst enabling Quintain’s vision for Wembley Park to be accelerated through the addition of significant financial resources, creating more mainstream homes in the capital more quickly than would otherwise be possible.”
An offer document will be sent to shareholders as soon as is practicable, but within 28 days, and then shareholders have 21 days to accept.
Quintain was advised by JP Morgan Cazenove and Lazard; Morgan Stanley is acting for Lone Star.
• Click here to read Estates Gazette’s profile of Max James and his plans to transform the business.
