by Derek Penfold
A takeover bid always comes as a bombshell, but Rodamco’s £17.9m bid for Haslemere is doubly painful because of the friendly relationship Haslemere thought they were enjoying with so many of the parties. Haslemere are far from downhearted and have plenty of ammunition to aim at the Dutch investment fund raiders, but a sense of betrayal is perceptible.
Haslemere has always been a company of gentlemen, with founders David Pickford and the late Fred Cleary being the epitome of good manners in business dealings or architectural taste. It has been that reticence which has left them unprepared for rough stuff from the City, invading the quiet and dignity of the Carlos Place head office.
What do Dutch fund managers know about City heritage and English antiquarianism — a point which may yet tell with more loyal Haslemere shareholders. While it is hardly the role of a plc property company, even one in its 25th year, to persist, almost single-handedly, in saving our architectural heritage, City traditionalists, well represented on the shareholders’ register, can still be sentimental enough to bear that in mind.
Haslemere are making no call to sentiment in their defence, though; David Pickford gave them a curt rebuff as soon as the bid arrived — an “uninformed assessment”; “out of touch” with Haslemere’s position. On Wednesday this week Haslemere and their bankers, Hill Samuel, gave their considered answers to the Rodamco/Kleinwort Benson bid.
Cluttons, who have been the firm’s valuers since very early days, were already in the process of a revaluation and that is now going to be a key part of Haslemere’s defence strategy.
The Rodamco bid is based on several key factors. First, it will be an important step in their property portfolio’s diversification. It was founded in 1979 as part of the Robeco group and now has over £500m of assets in European and US properties — but nothing here. Jones Lang Wootton have advised them in Europe and the USA, but are not associated with them here. There was a supposed share stake in Land Securities, below the 5% declarable level, but that is rumoured to have thinned down now.
Rodamco say the company will be used as a “basis for further expansion” in the UK, although, with a cash offer, Haslemere shareholders who sell will not be participating in any of that.
Shareholders with longer memories may also recall the brave intentions of another Dutch raider, Wereldhave. They failed in their attempt to buy English Property Corporation, but chose as their UK property vehicle Midhurst White, a one-time Oliver Jessel and AIP company, latterly run by the late Richard Coopman. In fact the Midhurst White portfolio was wound right down, and there was no further public sighting of it.
Wereldhave did go on to form a joint company with the Canadian property interests of Cemp, who are also a low-key presence, although that does help keep their UK stock exchange quotation alive.
Rodamco say that Haslemere’s earnings per share for the year to last March are “nearly 5% below that in the year to March 1981”. David Pickford replies that they have always been conservative in their treatment of development costs, charging interest, for instance, against profits in full, rather than capitalising them. The scale of Haslemere’s development programme has grown “considerably” since 1981, so have development costs. “If all the development costs had been capitalised, earnings per share in 1985 would have been substantially above the figure for 1981, and in line with dividend growth.”
Rodamco also charge that, in the same four years, annual compound growth rate in fully diluted net assets per share was “well below” the sector average, and the share price in the period has also underperformed. To which Haslemere reply that, as a result of “prudent policy”, dividend cover in 1981 was 2.7 times. Since then the dividend has been increased by over 10% pa, “much in line with earnings, had all development costs been capitalised. Earnings in 1985 still covered the increased dividend by 1.6 times, even after costs of the large development programme”.
David Pickford says Rodamco’s choice of the March 1981 to March 1985 years for their attack is “cleverly selected”: taking a “more-normal” five- or 10-year period, asset value has grown at annual compound rates of over 8% and 10% respectively.
Meanwhile, the bid is facing a technical hurdle with the Stock Exchange, which is investigating the way in which Rodamco’s brokers Rowe & Pitman carried out the “dawn raid” on Haslemere’s shares.
As we reported last week (p586), Rodamco went into the bid with a near 12% stake, built up since summer 1984. Within a short time that morning they were up to 24%, on their offer price of 600p (against the night before’s pre-bid price of 505p).
While the 95p hike in price might look attractive and a good reason to sell, it is being suggested that some vendors thought Rodamco were only going for a 29% stake. If 600p were to be the price for a complete takeover (as it was) then those vendors might have been more reticent. Indeed it went to 620p — where it still was at close of business this Wednesday, a week after the 600p offer.
The actual bidder for Haslemere is Rodamco Property plc, who have two Dutch Rodamco directors on their board, with Maxwell Creasey, who only retired from the MEPC board a short while ago. The company’s name was only registered at Companies House on February 7. Mr Creasey’s role — where presumably he is giving the Dutch useful guidance on the bid — has also been a shock. Despite his long personal association with David Pickford, there has been no contact since the bid.
Haslemere are now spending their time making clear to investors and City commentators that there is a lot more to them than tasteful period restoration.
Haslemere have, for instance, been successful industrial developers, with 21% by value of their portfolio in this sector.
Things are likely to go quiet now (unless the Stock Exchange tries to unravel the dawn raid) until the Cluttons’ valuation appears. With all this going on, Gerald Powell, Haslemere’s managing director, has not had time to think how all this (let alone the possible eventual loss of the company) might affect his coming presidency of the British Property Federation. The BPF’s headquarters in Catherine Place, SW1, were, inevitably, another Haslemere refurb.
