Over a thousand years since the Vikings last invaded the U.K., a fresh incursion is on the cards as Norwegian-backed real estate companies Capco and Shaftsbury are poised to merge.
The two real estate companies own large chunks of London’s West End property estates, while backer Norges Bank –Norway’s huge sovereign wealth fund – already jointly owns London’s famous Regent Street after a ‘deal of the decade’ acquisition made in 2010.
Capital & Counties Properties – more commonly known as Capco – and Shaftesbury have confirmed that they are in advanced talks about a $4.3 billion merger that would bring world-famous tourist destinations including Covent Garden, Soho and Chinatown, under common ownership.
If completed, an all-share tie-up would unite two of London’s most prominent and respected landlords, creating a powerhouse of West End property ownership as the U.K. capital continues to try and recover from the devastating impact of the pandemic.
Capco is the landlord to stores and restaurants in tourist-magnet Covent Garden, while Shaftesbury owns blocks of other prime central London landmarks, such as nearby Seven Dials, Carnaby Street and Chinatown, all in the heart of the West End.
Speculation about a tie-up between the two companies has ramped up ever since May 2020, when Capco bought Hong Kong property tycoon Samuel Tak Lee’s 26% stake in Shaftesbury for $537 million.
Under the terms, Shaftesbury would own 53% and Capco shareholders would have the remainder in a deal structured as an acquisition of Shaftesbury by Capco, the companies said in a statement. Capco chief executive Ian Hawksworth will become CEO of the merged business.
The firms added that the merger would create a real estate investment trust focussed on London’s West End with a portfolio of some 1.8 million sq ft of retail and hospitality space “in high-profile destinations including Covent Garden, Carnaby, Chinatown and Soho”.
Norges Bank Backs West End Merger
Norges Bank, Norway’s sovereign wealth fund, is understood to be in favour of the deal and is likely to be an instrumental player in a merger, because of its large stakes in both Capco and Shaftesbury.
Like most real estate companies, both were hit hard by the pandemic, with Shaftesbury raising about $370 million from a share sale in the autumn of 2020, while Capco participated in that cash call on a pro rata basis, enabling it to maintain its stake.
In recent months, landlords have become more upbeat about central London’s prospects and Shaftesbury said in February that its vacancy rate had fallen below 5% for the first time since the onset of the pandemic.
“We are pleased with the strong level of leasing demand for Covent Garden which has contributed to a valuation uplift,” Hawksworth said during the same month. “With footfall continuing to increase, customer sales approaching 2019 levels and our creative approach, Covent Garden is the most vibrant district in the West End.”
Shares in Capco were off around 5% today, which left Capco with a market capitalization of about $1.64 billion, while Shaftesbury was nearly 4% lower, giving it a market value of around $2.64 billion.
Capco dates back to the 1930s, although it did not acquire Covent Garden’s famous Piazza until 2006, while Shaftesbury, which owns 16 acres in the West End, was founded in 1985, floating in London the following year.