Blackstone has taken the rare move of increasing an offer for St Modwen Properties that the company’s board had already backed after some shareholders went public with concerns that the price was too low.
The revised offer values St Modwen at £1.27bn, or 560p a share. It comes a month after an original bid of £1.24bn, or 542p a share was recommended by the board.
St Modwen’s has been at the centre of a fierce row between traditional fund managers and private equity firms in recent weeks, amid an acquisition frenzy of UK companies by buyout firms.
The St Modwen board had come under pressure to seek a higher price, with the original offer drawing criticism from major shareholders including J O Hambro and Janus Henderson, which argued that the company was worth more.
Blackstone needs to win more than 75 per cent of voting shareholders for its offer to be accepted. That would have been a struggle against opposition from J O Hambro, which said last month that it held about 9.3 per cent of St Modwen’s shares across its funds and advised accounts.
Alex Savvides, senior fund manager of the JOHCM UK dynamic fund, said the increased offer was a “vindication of our firm opinion that the board had sold all shareholders short” in backing the previous bid.
“The offer . . . is a begrudging acceptance by Blackstone that it is underpaying for this asset,” he added. “That we got any increase at all is a win for shareholder stewardship, engagement and activism.”
St Modwen shareholders Aviva Investors, which holds more than 7 per cent, and Aberdeen Standard Investments, a top 20 investor, said they would back the higher offer. The families of co-founders Sir Stanley Clarke and Jim Leavesley, who together own about 10 per cent of shares, are also supportive of the deal.
St Modwen has a housebuilding division and works on regeneration projects but, according to analysts, Blackstone’s bid was most likely motivated by the FTSE 250 company’s third division: an extensive logistics development and management business.
Blackstone, through its Mileway platform, has built a European warehouse portfolio worth billions. St Modwen, meanwhile, has enough land to develop 19m sq ft of new warehouse space in the UK, a highly developed logistics market in which well-located space is relatively hard to come by.
Danuta Gray, chair of St Modwen, said the board had “considered Blackstone’s approach from a position of strength” and took “a robust position on value”. The acquisition by Blackstone would accelerate and de-risk St Modwen’s growth, she added.
James Seppala, head of Blackstone’s European real estate division, said the private equity group would “be providing significant additional capital” to St Modwen.
The property company is one of 13 listed businesses that private equity firms have put into play since the start of the year, the highest figure since 1999. But traditional fund managers have pushed back against some of the deals, warning of a raid on UK companies and arguing that many of the offers are too low.
This week, Legal & General Investment Management, the UK’s largest asset manager, hit out at Clayton, Dubilier & Rice’s bid for Wm Morrisons, the supermarket chain, while M&G Investments and Allianz Global Investors last month criticised plans to sell FTSE 250-listed UDG Healthcare to CD&R.
In May, J O Hambro said it was against the sale of St Modwen at the price on offer. “We feel it would be a shame for stock market investors to lose the long-term optionality within the group’s businesses and land bank, built up over many years, particularly for the small premium being offered today.”
J O Hambro and Janus Henderson could not be reached for comment at the time of publication.
This article has been amended to clarify that the initial bid had not been accepted by the company