Shares in St Modwen Properties have continued to rise above the level of a proposed takeover by Blackstone, suggesting that some investors anticipate an improved offer, or even a rival bid.
The company said yesterday (20 May) that its directors will recommend a takeover by Blackstone at 542p per share, valuing St Modwen at close to £1.24bn.
St Modwen’s shares closed above that offer level on the day, at 545p. In trading this afternoon (21 May), they rose as high as 553p, with a low of 544p. At 550p, St Modwen would be valued at more than £1.26bn.
Blackstone’s offer is a 21% premium to St Modwen’s closing share price of 448p the day before the offer period started, and a near-24% premium to 2020 net tangible assets per share of 438p. However, Panmure Gordon analyst Miranda Cockburn said assets per share are likely to reach 481p by November given the strength of the industrial market. That would make the premium less generous than it appears when using last year’s value.
Before the announcement of the Blackstone deal, sell-side consensus for net tangible assets for November 2021 was 465p a share, according to a spokesman for St Modwen.
The Blackstone offer is supported by St Modwen’s directors as well as members of the Clarke family, accounting for 6.59% of the company’s share capital. Institutional investors in the company include JO Hambro Capital Management, Aviva and Royal London Asset Management.
A spokesman for JO Hambro said the firm is “against the sale of the company at this price”. St Modwen’s homes and logistics divisions could both be grown on the public markets through organic development and M&A, he said, and make the company “an attractive and lower-risk stock market proposition for a number of years, not just this year and next”.
He added: “We feel it would be a shame for stock market investors to lose the long-term optionality within the group’s businesses and land bank, built up over many years, particularly for the small premium being offered today.”
A takeover target’s shares rising above the level of an agreed deal can be a sign that buyers expect to see another bidder emerge to push the price up, or that they think the initial bidder will be forced to raise the offer.
“The theory [in such a situation] is that the offer will be improved if there is shareholder resistance or there might be another bid,” said a City M&A banker away from the planned St Modwen deal.
An equity analyst at a European bank noted that the rise is also likely to be prompted by arbitrage funds betting on stock movements around the takeover. A retail shareholder on an online forum said the rising share price suggests “the market does not think it is all over”.
Blackstone declined to comment.
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