Growthpoint Properties has agreed to sell its entire 69% shareholding in UK community focused shopping centre company Capital & Regional (C&R) to NewRiver REIT for about R2.33 billion.
Growthpoint’s decision was part of a broader transaction in progress - NewRiver REIT, which also invests in UK shopping centres, has offered to buy all the issued and to-be-issued C&R shares, for a total of GBP147 million, or 62.5 pence per C&R share, of which Growthpoint would receive the equivalent of GBP101.4m. C&R is listed both on the Johannesburg and London Stock Exchanges.
Growthpoint CEO Norbett Sasse said the sale reflected an aim to simplify and optimise their international investments. NewRiver REIT, also listed on the LSE and which owns 33 shopping centres, 25 retail warehouses, 14 high street units and over 700 public houses, will fund the deal with existing cash resources.
In the proposed transaction, each C&R share will be exchanged for 31.25 pence in cash, and 0.41946 new NewRiver shares. For Growthpoint, this will amount to about GBP50.7m in cash and 67.4 million new NewRiver shares, representing an approximate 14% interest in NewRiverr.
“We still believe C&R is an attractive platform with a high-quality portfolio of assets and strong prospects. However, it has become non-core to our group-wide strategic focus, representing 4.6% of total assets by book value and 3.6% of total distributable income.
Given our aim of simplifying the business and optimising our international portfolio, we have clearly stated that we were evaluating all options to maximise the value of our investment in C&R,” said Sasse.
After initially receiving unsolicited expressions of interest in C&R, Growthpoint had considered disposal, and the offer represented a 21% premium to its share price the day before NewRiver’s preliminary expression of interest was received, and a 21% premium to the three-month volume-weighted average price.
Growthpoint will also receive the C&R interim dividend for the six-months to June 30 of 2.85 pence per share. Once the deal is completed, a further dividend, equivalent to 1.3 pence per C&R share, paid either by NewRiver or C&R, depending on the effective date of the transaction, will be received by Growthpoint.
Sasse said they would use proceeds to strengthen the balance sheet and pursue investment opportunities. The selling down of Growthpoint’s stake in NewRiver remained an option to further simplify and optimise its international investments.
C&R shareholders representing at least 75% of its shares need to approve the transaction - Growthpoint’s approval alone takes this number to nearly 69%. On completion, the intention is to delist C&R.
C&R’s portfolio comprises six community shopping centres mainly in London and South East England that are mainly let to essential and value-oriented retailers.
The C&R and NewRiver boards believe C&R’s portfolio is complementary to NewRiver’s, as both comprise assets that aim to satisfy convenience shopping by an attractive customer base, with over 70 percent of shoppers in both NewRiver and C&R assets travelling less than five miles and over 55 percent of them having above average post-tax net incomes.
The NewRiver and C&R boards said also the disposal of non-core assets in recent years and the acquisition of The Gyle in Edinburgh in September had enhanced the complementarity of C&R's portfolio.
They considered the tenant profiles low-risk, with opportunities to add value. Some 87% of C&R's retail tenant base by rent comprises tenants focused on value and essential goods and services, comparable to about 80% of NewRiver's retail tenant base.
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