There is “no other reason for Capco to buy a stake in Shaftesbury than for it to be a precursor to a merger between the two businesses,” said analysts at Peel Hunt
Properties PLC () said overnight that it is in talks to buy the 26.3% stake in West End property group PLC () owned by Samuel Tak Lee.
Talks with the secretive Hong Kong billionaire could lead to a takeover of the Carnaby Street and Chinatown owner by Capco, which owns a £2.6bn estate in nearby Covent Garden.
Shaftesbury shares closed at 603p overnight, close to 40% lower than their 52-week high from the autumn and a 39% discount to Shaftesbury’s September 2019 net asset value (NAV).
Analysts at Peel Hunt said on Friday they thought the current price is below Lee’s average acquisition price.
Capco confirmed a report on property website React News but said “there can be no certainty that these discussions will lead to any agreement between Capco and the selling shareholder”.
Lee, who controls the 1.3mln square foot Langham Estate between Oxford Street and Euston Road, has been in a tussle with Shaftesbury’s board in recent years, raising objections about share placings the board has carried out and diluted his stake.
Lee made an offer to buy up shares in the group in 2015 at 888p.
Peel Hunt’s analysts said although 500p has been mooted as a potential price, the latest close price values Lee’s stake at circa £490mln.
“His motives are, once again, unknown: does he need the cash or does he see this as a good exit price.”
Either way, the analysts said they “see no other reason for Capco to buy a stake in Shaftesbury than for it to be a precursor to a merger between the two businesses”.
Capco last acquired its own shares in March at a 52% discount to the December NAV, “so buying shares in a competitor at a tighter discount seems counterintuitive”.