Blackstone puts in an offer of $1.68 billion for St Modwen

Blackstone, the private equity firm, is planning to acquire St Modwen Properties, a logistics and housing developer, for £1.2bn ($1.68 billion) in a bid to take advantage of the Pandemic-induced boom in this sector.  The offer value is a 21 percent premium on its share price of 448p and a 2 percent premium to pre-coronavirus highs.

The FTSE 250 company is into logistics development and management, housebuilding and has enough real estate to develop 19m sq ft of warehouse space in the next few years.

The pandemic has seen logistics companies just take off due to the need for a smooth passageway of goods and the rising demand in online sales. All businesses wanting to keep their heads above water needed an online presence and a delivery system to help fulfill services and orders.

Blackstone Acquisition of Ancestry

Blackstone Manhattan Office

Delivery and storage networks have been in high demand, and bidding for sites has been competitive as investors increased their exposure to a sector seen as a relatively safe source of long-term income.

Blackstone, through its subsidiary Mileway, has been aggressively acquiring warehouses across Europe in the past two years. James Seppala, head of Blackstone real estate in Europe, has described logistics as “one of our highest conviction, long-term investment themes”.

While other sectors such as retail and hospitality have seen a notable plummet in their value and business, owners of warehouses have become suddenly high in demand and recouped almost all they were owed.

St Modwen’s extensive logistics development funnel was the deciding factor in Blackstone’s decision to acquire the company, said Miranda Cockburn, an analyst at Panmure Gordon. “Any company with the ability to develop into the strength of demand [for warehousing] will do well in the next few years,” she said. “Pulling together a land bank is not easy and land values for industrial land have gone up massively in the past few years.”

Blackstone is banking on the UK making a fast and full recovery from the pandemic and new business opportunities following Brexit. It recently bought Bourne Leisure, a holiday and recreations park chain. It also acquired IQ Student Accommodation for £4.7bn in 2020.

Blackstone is capital flush from $14 billion Saudi-backed infrastructure funds and using the same to target UK investments. The group’s global head of infrastructure Sean Klimczak told the Financial Times last year that it was “quite bullish” on the UK, which it saw as “undervalued” and a “significant opportunity”.

In the latest development, while the British company said the company board is ready to recommend the deal from Balckstone, it is said that JO Hambro, a top shareholder in St Modwen is unhappy with the offer price.

Panmure Gordon analysts said in a statement, “Although a circa 24 percent premium to the last reported NAV looks attractive — particularly against recent sector M&A — it reflects less than three years of growth on our forecasts and arguably provides access to an irreplaceable pipeline of further growth opportunities.”

Anna Domanska
Anna Domanska is an Industry Leaders Magazine author possessing wide-range of knowledge for Business News. She is an avid reader and writer of Business and CEO Magazines and a rigorous follower of Business Leaders.

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