Private equity giant Blackstone ups bid for St Modwen

Priced at 560p a share, it is Blackstone’s seventh offer for the business and, like the previous bid, won the recommendation of the board.

Blackstone said it was its final offer and major shareholders Aviva and Aberdeen Standard, with 10% of the company between them, said they would vote in favour.

Two wealthy family shareholders, the Clarkes and the Leavesleys, also accepted, taking the total of acceptances up to 20%.

It is the latest in a long run of private equity takeovers of stock market companies, triggered by the huge size of PE funds and optimism about the outlook for the UK economy.

Some traditional fund managers have become increasingly angry about US PE firms offering opportunistic lowball offers, claiming they are taking advantage of the UK public markets’ relatively lowly valuations since the Brexit referendum.

St Modwen’s board came in for criticism for recommending the previous lower offer, with shareholders JO Hambro and Janus Henderson publicly saying they would reject the offer.

It is thought the board went back to Blackstone with their complaints and the buyout firm responded with today’s higher offer.

The increase also came after a valuation exercise by St Modwen came in with a higher net asset value than at the time of the previous bid. On a per share value, the NAV is now 463p where before it was 427.7p

In terms of the premium to net asset value, the bid is at a similar multiple to the previous offer of 21%.

Clayton, Dubilier & Rice’s bid for Morrisons this week added to the disquiet and fuelled a high profile campaign against private equity in the Daily Mail newspaper which has unnerved PE firms.

Blackstone is buying St Modwen primarily for its large portfolio of warehouses used by the booming online retailers. It reckons it can increase the average returns of St Modwen from 6% now to up to 10%. It has a fast growing global warehouse business called Mileway which has 600 sites in the UK.

The pandemic-induced surge in online shopping has led to a goldrush for warehouse space, with private equity firms often leading the charge.

CBRE this week estimated European ecommerce firms would need a further 300 million square feet of warehouse space by 2025.

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