LONDON: NewRiver REIT plc and Capital & Regional plc have agreed on a cash and share offer, where NewRiver will acquire the entire share capital of Capital & Regional. This merger will be executed through a scheme of arrangement under Part 26 of the Companies Act.

For each Capital & Regional share, shareholders will receive 31.25 pence in cash and 0.41946 new NewRiver shares. Based on NewRiver’s closing price of 74.5 pence on May 22, 2024, the offer values each Capital & Regional share at 62.5 pence, totaling approximately £147 million.

This represents a 21% premium to the undisturbed closing price of 51.5 pence, a 21% premium to the three-month VWAP of 51.7 pence, and an 18% premium to the six-month VWAP of 53.0 pence.

Capital & Regional shareholders will receive around 98.5 million New NewRiver Shares, owning about 21% of the combined entity post-merger.

This merger aims to create a stronger combined group, leveraging the strengths of both companies.

Commenting on the Combination, Lynn Fordham, Chair of NewRiver said: “This is a compelling transaction which has a strong strategic, operational and financial rationale at an attractive point in the market cycle. Combining the complementary retail portfolios of NewRiver and Capital & Regional will create an enlarged specialist REIT with a c. £0.9 billion portfolio of high quality, well-located assets, including 29 community shopping centres and 13 retail parks across the UK and Northern Ireland.

Both portfolios share a focus on convenience, value and essential goods and services, and are well positioned to benefit from future rental growth, supported by NewRiver’s retail asset management platform.

“In addition to providing enhanced scale with total assets under management, including NewRiver’s existing Capital Partnerships business, of approximately £2.4 billion, the transaction will offer substantial cost savings and significant earnings accretion, enhancing the Combined Group’s ability to pay a materially higher, covered dividend, whilst increased scale should also benefit future share liquidity for shareholders”.

Commenting on the Combination, David Hunter, Chair of Capital & Regional said: “The combination of these two complementary portfolios provides our shareholders with both upfront liquidity through the cash element and equity exposure to an enlarged UK REIT, offering increased share liquidity from a broader shareholder base.

In addition, the Combination will result in further asset and tenant diversification and lower operating costs than would otherwise be achieved by Capital & Regional on a standalone basis. Capital & Regional Shareholders will also benefit from exposure to a business with a £0.9 billion property portfolio, a strong balance sheet and a combined track record of sustained dividend growth, providing an excellent opportunity to deliver ongoing value for shareholders.

“When weighing the standalone prospects of Capital & Regional against the Combination, and in light of Growthpoint’s intentions regarding its majority stake, we believe this offer is in the best interests of Capital & Regional Shareholders and are pleased to unanimously recommend it to them”.