Real Estate

West End landlords Shaftesbury and Capco agree £5bn merger

Two of the West End’s biggest landlords have agreed to merge, creating a £5bn estate spanning some of London’s best-known tourist destinations.

Capital & Counties, owner of Covent Garden, and Shaftesbury, which has a portfolio covering parts of Soho, Chinatown and Carnaby Street, announced agreed terms for an all-share merger on Thursday morning.

The deal will be subject to shareholder approval, and the companies are likely to face some pushback, with two Shaftesbury investors — Royal London Asset Management and Investec — having already questioned whether a merger is in their best interests.

However, the largest shareholder in both Shaftesbury and Capco, Norges Bank Investment Management, the Norwegian sovereign wealth fund, will vote in favour of the deal.

The fund, which holds 25 per cent of Shaftesbury shares and 15 per cent of Capco shares, has long been supportive of a merger, according to the companies.

Under the terms of the deal, existing shareholders in Shaftesbury will own 53 per cent of the newly formed group, and Capco shareholders 47 per cent.

Ian Hawksworth, Capco’s chief executive, will become head of the combined group, which will be called Shaftesbury Capital.

Brian Bickell, who has led Shaftesbury for more than a decade, will retire on completion of the merger.

The deal will bring to an end a courtship that predates the pandemic, with both companies long talking up the merits of a tie-up that will give the combined group control over one of the capital’s most popular retail and leisure destinations.

Hawksworth said the new management team would look to invest in the West End’s public realm and would focus on continuity rather than change.

He described his role as “about doing lots and lots of little things really. This is about creating vibrant areas and lots of choice for consumers, [playing a] long term custodial role for this estate”.

The recovery of the area, since Covid-19 forced tenants to shut shops for long stretches of 2020 and 2021, has given the management of both teams more confidence to pursue the deal, he added.

Over the next two years, Shaftesbury Capital expects to slash £12mn from its annual costs as a result of the merger.

The companies expect to complete the deal before the end of the year, with shareholders receiving 3.35 new Capco shares for each Shaftesbury share.

However, not every shareholder is supportive.

Mike Fox, head of sustainable investments at Royal London Asset Management, said “the terms announced today are unattractive and fail to reflect the inherent value of the Shaftesbury estate. It is unclear why it is in the interests of Shaftesbury shareholders to accept them.”

Investec, which owns 1.65 per cent of Shaftesbury, has also previously raised concerns about the merger.

Capco was advised by Rothschild & Co, UBS and Jefferies. Shaftesbury was advised by Evercore and Blackdown.


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