London & Stamford Property Plc (LSP) is in talks to buy Metric Property Investments Plc (METP) in an all-share deal that would combine two U.K. real estate investment trusts focused on commercial property.
London & Stamford would offer 0.94 of a new share for each Metric share, the two companies said in a joint statement today. That values Metric’s shares at 109 pence, 17 percent higher than the closing price yesterday, according to Bloomberg News calculations. A purchase at that price would give Metric a value of 207 million pounds ($331 million).
“A significant return of capital to both sets of shareholders following the completion of the merger is planned,” the companies said in the statement.
A takeover would reunite former colleagues who set up separate companies to make U.K. commercial property acquisitions after the financial crisis damped lending and caused a slide in values.
London & Stamford, founded in late 2007, was the third venture of property entrepreneurs Raymond Mould and Patrick Vaughan. Its most high-profile deal was the purchase and sale of a 50 percent stake in the Meadowhall mall near Sheffield, which delivered a 32 percent annual return, broker Peel Hunt LLP estimated.
Metric closed up about 10 percent at 102 pence, the highest since March 2010, giving the company a market value of 194 million pounds. London & Stamford declined 3 pence, or 2.6 percent, to 114 pence, giving it a market value of 619 million pounds.
Metric, started by three former British Land Co. executives, raised 175 million pounds in a March 2010 initial public share offering to acquire shopping centers and retail parks. Its Chief Executive Officer, Andrew Jones, will have the same job in a combined company with London & Stamford, according to the statement. Jones was part of the management team at Pillar Property Plc, which Mould and Vaughan sold to British Land in 2005.
Aside from reuniting Jones with his mentors, “the merger elegantly gives London & Standard management succession,” Jefferies Group Inc. analysts Mike Prew and Robert Duncan said in a note to investors.
London & Stamford’s Vaughan, 65, would become executive chairman of the new group, the companies said. Mould 71, intends to retire and act as an adviser for an unspecified period.
London & Stamford owns residential, office, retail and distribution warehouse properties, some of which it also manages for investment partners Green Park Investments, based in the Middle East, and Canada’s Public Sector Investment Board. Metric owns “big box” retail warehouses and supermarkets with a total of more than 1 million square feet (92,900 square meters) of space.
Today’s statement doesn’t represent a firm intention to make an offer and the terms may change, the companies said.
Credit Suisse Group AG and Peel Hunt are advising London & Stamford, while Metric is being advised by JPMorgan Chase & Co. and Oriel Securities Ltd.
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