In a rare move, Blackstone has increased its offer for St Modwen Properties from the original bid of £1.24bn, or 542p per share, to £1.27bn, or 560p a share.
The company board approved the deal earlier, but some shareholders, namely J O Hambro and Janus Henderson, were unhappy with the price fixed, which they felt was too low.
St Modwen has attracted the attention of fund managers and private equity firms both amidst an acquisition wave that has hit UK firms.
The original offer for St Modwen drew fire from the major shareholders who argued that the company was worth more. Blackstone needs the approval of more than 75 per cent of voting shareholders for its offer to be accepted. With J O Hambro holding about 9.3 per cent of St Modwen’s shares across its funds and advised accounts, such an approval is difficult. Aviva Investors, which holds more than 7 per cent, and Aberdeen Standard Investments, a top 20 investor, also said they would back the higher offer.
In May, when the offer was made, J O Hambro had said it was against the sale of St Modwen at the price quoted. “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.”
Alex Savvides, senior fund manager of the JOHCM UK dynamic fund, said the increased offer was a “vindication of our firm opinion that the board had sold all shareholders short. The offer . . . is a begrudging acceptance by Blackstone that it is underpaying for this asset,” he added. “That we got any increase at all is a win for shareholder stewardship, engagement and activism.”
St Modwen is a FTSE 250 company and is into logistics development and management, housebuilding, and has enough real estate to develop 19million sq ft of warehouse space in the next few years. Blackstone, through its Mileway platform, has a European warehouse portfolio worth billions.
Danuta Gray, chairperson of St Modwen, said the board had “considered Blackstone’s approach from a position of strength” and took “a robust position on value”. James Seppala, head of Blackstone’s European real estate division, said the private equity group would “be providing significant additional capital” to St Modwen.
St Modwen is among the 13 listed companies that have attracted the attention of private equity firms this year. But traditional fund managers argue that the offers made are too low.
Legal & General Investment Management, the UK’s largest asset manager, have objected to the Clayton, Dubilier & Rice’s bid for Wm Morrisons, the supermarket chain, while M&G Investments and Allianz Global Investors last month criticised plans to sell FTSE 250-listed UDG Healthcare to CD&R.
Delivery and storage networks have been in high demand, and bidding for sites has been competitive as investors increased their exposure to a sector seen as a relatively safe source of long-term income.
Through its subsidiary Mileway, Blackstone has been aggressively acquiring warehouses across Europe in the past two years. James Seppala, head of Blackstone real estate in Europe, has described logistics as “one of our highest conviction, long-term investment themes”.
St Modwen’s extensive logistics development funnel was the deciding factor in Blackstone’s decision to acquire the company, said Miranda Cockburn, an analyst at Panmure Gordon. “Any company with the ability to develop into the strength of demand [for warehousing] will do well in the next few years,” she said. “Pulling together a land bank is not easy and land values for industrial land have gone up massively in the past few years.”
Blackstone is capital flush from the $14 billion Saudi-backed infrastructure funds and using the same to target UK investments. The group’s global head of infrastructure, Sean Klimczak, told the Financial Times last year that it was “quite bullish” on the UK, which it saw as “undervalued” and a “significant opportunity”.
