St. Modwen Investor Says $1.7 Billion Blackstone Bid Too Low

(Bloomberg) -- One of St. Modwen Properties Plc’s biggest investors said Blackstone Group Inc.’s 1.2 billion-pound ($1.7 billion) takeover proposal for the U.K. developer is too low.

J O Hambro Capital Management Ltd. likely wouldn’t support a sale of the company at Blackstone’s potential bid level of 542 pence per share, it said in response to Bloomberg queries. The fund manager owns just over 9% of St. Modwen, according to the statement.

St. Modwen’s current plans will deliver value “well in excess of the potential offer,” Alex Savvides, a senior fund manager at J O Hambro, said by email.

“There are unique strengths to this business and its asset base, built up over many years, that the stock market has in recent years consistently failed to recognize,” said Savvides, who helps run J O Hambro’s UK Dynamic Fund. “Our preference would be to work with the existing board to help support, both strategically and financially, the continuation and acceleration of the existing strategy.”

Warehouse Demand

St. Modwen announced earlier Friday it received a non-binding proposal from Blackstone about a potential cash takeover bid. Its board would be willing to unanimously recommend the deal if Blackstone makes a firm offer at the proposed level, St. Modwen said in the statement.

The company has one of the largest logistics property development pipelines in the U.K., totaling 19 million square feet (1.8 million square meters), according to Savvides. Brexit and the pandemic have accelerated demand for warehouses, he said.

“Controlling such a large estate of well-located land in key transport hubs, and with the balance sheet to build out the developments, is therefore a key attraction and competitive advantage for St. Modwen,” Savvides said.

The company’s high-growth residential business is an asset which could be sold or spun off at a valuation higher than its current implied value, he said.

St. Modwen has an “irreplaceable pipeline of further growth opportunities,” Peel Hunt wrote in a note to clients Friday. While the offer’s 24% premium to net asset value seems attractive, it represents only three years of growth, analysts including James Carswell wrote.

Blackstone has until June 4 to make a binding offer for the company, under the U.K.’s takeover rules. Representatives for Blackstone and St. Modwen declined to comment.

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