Jun 04, 2007
Proposed Disposal of Slough Estates USA for US$2.9 Billion (£1.5 Billion), £250 Million Special Dividend and Share Consolidation
SEGRO plc (“SEGRO”), the leading provider of Flexible Business Space in Europe, today announces the proposed disposal of Slough Estates USA Inc. (“Slough Estates USA”), its life sciences real estate business in the USA, to Health Care Property Investors, Inc. (“HCP”). This follows SEGRO’s strategic review of Slough Estates USA announced in November 2006.
Ian Coull, Chief Executive of SEGRO, said:
“SEGRO has a well established platform upon which to grow its core Flexible Business Space model, both in the UK and in Continental Europe, where we see excellent opportunities to apply our skills and to achieve attractive total returns. This disposal allows us to focus on these opportunities in Europe, while enabling our Shareholders to benefit significantly from the value we created in Slough Estates USA’s highly specialised property business. SEGRO has built a successful business in the “biotech” market, but one which is materially different from, and has no synergy with, our activities in Europe. We believe Slough Estates USA will thrive under its new owners, who are themselves well established in the US healthcare property market.”
Highlights:
- Disposal of Slough Estates USA to HCP for gross consideration of US$2.9 billion (£1.5 billion), following a highly competitive auction process. The gross consideration is subject to certain balance sheet adjustments, calculated in accordance with the provisions of the Share Purchase Agreement. After deduction of £583 million of estimated debt to be transferred with the business, anticipated taxation of approximately £297 million and estimated costs of £25 million, the net cash proceeds receivable by SEGRO are approximately US$1.1 billion (approximately £574 million).
- The sale of Slough Estates USA is the culmination of the strategic repositioning of the Group which began in 2004 and which will create a very focused business model. SEGRO is a specialised investor and developer of Flexible Business Space in Europe. The complete exit from life sciences real estate in the US will enable SEGRO to concentrate its resources on building upon this core strategic position.
- Following Completion, SEGRO intends to return approximately £250 million (equivalent to 53 pence per Existing Ordinary Share) to Shareholders by means of a Special Dividend. The remaining proceeds of approximately £324 million will be used to temporarily reduce the Continuing Group's net indebtedness prior to being re-invested to fund the Continuing Group’s growth plans in Continental Europe and the UK.
- SEGRO considered alternative transaction structures to monetise its investment in Slough Estates USA but concluded that a straightforward cash disposal was in the best interests of Shareholders.
- The gross cash consideration of US$2.9 billion effectively represents a premium of 26 per cent over the IFRS book value of the property assets as at 31 December 2006 and a surplus of 44% over the net assets of Slough Estates USA at that date.
- The Special Dividend will be accompanied by a consolidation of SEGRO’s ordinary share capital – facilitating comparability of earnings and net asset values per share and share prices before and after the payment of the Special Dividend.
- If SEGRO’s 2006 financial results were retrospectively adjusted to reflect the effects of the Disposal, the payment of the Special Dividend and the Share Consolidation, then the pro-forma impacts on the 2006 financial results would have included:
|
Financial statements
31 December 2006 |
Pro-forma for sale of
Slough Estates USA as at 31 December 2006 |
|
Total assets (£m) |
6,390 |
5,478 |
|
NAV per share (p) |
718 |
761 |
|
Adjusted diluted NAV per share (p) |
775 |
776 |
|
Gross property rental income (£m) |
305 |
229 |
|
Adjusted diluted earnings per share (p) |
25.1 |
24.0 |
- SEGRO has a substantial potential development pipeline in the UK and Continental Europe which, as at 31 December 2006, had a potential future expenditure on existing land holdings amounting to almost £1.6 billion. Following aggregate expenditure of over £500 million on European acquisitions in 2005 and 2006, SEGRO plans further growth though the acquisition of property portfolios and development sites where we believe attractive returns can be achieved - particularly in Continental Europe.
- The Disposal is conditional, amongst other things, upon obtaining the approval of Shareholders at the Extraordinary General Meeting.
- The Disposal is expected to complete during the third quarter of 2007, with payment of the Special Dividend being made as soon as practicable after Completion.
Further financial information on Slough Estates USA and pro-forma financial information on SEGRO’s continuing business post the Disposal, the resultant payment of the Special Dividend and the Share Consolidation can be found in Appendix I.
This summary should be read in conjunction with the full text of this announcement.
A circular containing further details of the Disposal, Special Dividend and Share Consolidation and containing detailed information on these proposals and setting out the notice of the Extraordinary General Meeting will be sent to Shareholders as soon as practicable.
A conference call for analysts and investors will be held today at 09:00 London time. At that time a powerpoint presentation will also be available in the Analyst Presentations section on the investor relations pages of the SEGRO website.
The conference call phone numbers are:
UK: +44 (0) 20 8611 0051 US: 18664327175
Contacts:
SEGRO
Tel: +44 1753 21 3335
Michael Waring
UBS Investment Bank
Tel: +44 20 7567 8000
Tim Guest
Tara King
Maitland
Tel: +44 20 7379 5151
Colin Browne
Merrill Lynch International
Tel: +44 20 7628 1000
Simon Fraser
Andrew Osborne
Basic SEGRO Facts as at 31 December 2006 (including Slough Estates USA). SEGRO is the leading provider of Flexible Business Space in Europe. Headquartered in the UK, SEGRO is listed on the London Stock Exchange and on Euronext in Paris. The company is a UK Real Estate Investment Trust (“REIT”) with operations in eleven countries, serving a diversified customer base of over 1,760 customers operating in a wide range of sectors, representing both small and large businesses, from start ups to global corporations. With investment property assets of £5.0 billion (£6.0 billion including trading properties and development assets) and approximately 4 million sq m of business space, SEGRO has an annual gross rental income in excess of £300 million.
This announcement is for information purposes only and does not constitute an offer or invitation to acquire or dispose of any securities or investment advice in any jurisdiction.
UBS Investment Bank is acting as financial adviser and joint broker to SEGRO, and no one else in connection with the Disposal, Special Dividend and Share Consolidation and will not be responsible to anyone other than SEGRO for providing the protections afforded to the clients of UBS Investment Bank nor for providing advice in relation to the Disposal, Special Dividend, Share Consolidation or any other matter referred to herein.
Merrill Lynch International are joint brokers to SEGRO and in this capacity they also provided financial advice on the proposals announced today.
Overseas Shareholders should inform themselves about and observe any applicable legal or regulatory requirements. If you are in any doubt about your position, you should consult your professional advisor in the relevant territory.
Please click here for the full press release in PDF format.