The vehicle of property investor Nicholas Candy has confirmed it is “in the early stages” of considering a takeover bid for Capital & Counties Properties PLC (LON:CAPC), sending shares in the property group up 21%.
Earlier this year, Capco proposed to split its prime London estates of Covent Garden and Earls Court, making Covent Garden into a central London focused REIT and selling off Earls Court, where the valuation has declined 2.4% in the last year.
Following reports in recent days, Candy Ventures on Monday confirmed it was mulling a cash bid but said that there is “no certainty” that it will go for the FTSE 250 property company.
Capco owns London's prime retail properties Covent Garden and Earls Court and has a market value of £2.1bn, a discount to its most recent net asset value, which saw Covent Garden valued at £2.6bn and Earl's Court at £0.6bn.
Candy, which will need to confirm its intentions by 5pm on 18 November, has held early-stage talks with Saudi Arabia’s Public Investment Fund about a joint move on Capco, the Sunday Times reported.
There is no indication of what the price Candy might be looking at, but broker Peel Hunt said "on a highly speculative basis", it would work on the assumption that the Covent Garden element of the portfolio is priced at around book value and the Earls Court element is priced at a "material discount".
With Capco trading on a 22% discount to NAV and a 0.6% dividend yield, the broker noted that for comparison peer Shaftesbury trades on a 4% discount to NAV.
Analysts at Jefferies observed that Capco's market cap has roughly halved since summer 2015, "before concerns started mounting on the supply of luxury flats in London which make up the bulk of the Earl's Court masterplan".
Shares were at 270.7p in Monday morning trading, swinging up after a tough few years in which the price halved.