By Samantha Machado
(Reuters) - Capital & Counties Properties (L:CAPCC) has agreed to buy a 26.3% stake in London rival Shaftesbury (L:SHB) from Hong Kong tycoon Samuel Tak Lee's for 436 million pounds ($540.7 million), the real estate manager said on Monday.
Both Capco and Shaftesbury own large parts of the real estate in London's West End central area. Capco is acquiring the stake from Veloqx, a trust fund set up by Tak Lee, for 540 pence per share, a discount of 13.9% to Shaftesbury's closing share price on Friday.
Major British property deals have all but come to a standstill as the coronavirus outbreak has led to retailers and other business halting rental payments, and cast doubt on both current and future valuations of buildings and portfolios.
Capco shares rose 2.8% to 168 pence in early trade, while Shaftesbury, which rose as much as 3% on Friday, fell 0.5% after the deal was announced.
Capco said the deal, which is expected to be completed in two tranches, would be fully funded through its shopping and entertainment estate Covent Garden's revolving credit facility of 705 million pounds.
"We consider the acquisition a shrewd move, utilising a strong balance sheet to capitalise on an attractive valuation," Liberum analysts said in a note.
In order to deploy cash towards the deal, Capco will not complete the share buy-back of 100 million pounds to shareholders, the FTSE-250 listed company said.
Rothschild & Co was the lead financial adviser and sponsor for Capco on the deal.
Separately, Shaftesbury said Tak Lee has withdrawn all legal proceedings against it over allegations and claims related to a 2017 share placement conducted by the company.
($1 = 0.8063 pounds)