Capco in talks to merge with another London property group

Two prime property landlords in London are planning to merge their operations, which will give local investors a sizeable exposure to the British property industry.

On Monday, JSE-listed Capital & Counties Properties (Capco), which was spun out of Liberty International in 2010, said it was exploring a possible merger with Shaftesbury, which owns 600 properties in London's West End.

Capco said if the proposed merger goes through, it will own 47% of the combined company. The rest of the company will be owned by other Shaftesbury shareholders. Capco currently owns 25.2% of Shaftesbury. Their respective stakes in the merged company were determined by the companies’ assets and market capitalisations.

"Subject to finalisation of such terms, it is currently envisaged that the possible merger will be structured as an acquisition of Shaftesbury by Capco," wrote Capco in a statement.

The merger will create a real estate investment trust (REIT) company focused on the West End of London with a portfolio of about 2.9 million square feet of space to rent.  

About 1.8 million square feet is retail and hospitality space, with office space and residential accommodation representing up the rest.

Capco owns £1.7 billion (~R33.8 billion) worth of prime properties in London’s Covent Garden, a popular shopping and tourist site that continued to see strong leasing demand, even during the pandemic. It did particularly well in the second half of 2021.

Shaftesbury owns properties clustered mainly in Carnaby, Seven Dials and Chinatown – as well as in Covent Garden, Soho and Fitzrovia. 

Capco said Norges Bank, a major shareholder in both Shaftesbury and Capco, has also signalled its support for the two companies to explore a merger.

But the full terms of the possible merger have not been finalised yet, and it's still not a done deal until due diligence is done on both sides and there is an offer on the table that both companies will be happy with.

Capco's share price gained almost a percent to R31.73 in late morning trading on the JSE on Monday.