Capital & Counties has announced it is considering a demerger, which would result in two separately-listed businesses – one focussed on Earls Court, and one on Covent Garden.
The Earls Court holdings (pictured left after the demolition of the Earls Court Exhibition Centre) would be put in to a development company focussed on delivering the Earls Court masterplan. This company would be led by current development director Gary Yardley. Capco’s share of property interests at Earls Court was independently valued at £759 million at 31 December 2017.
Capco say the demerger would enhance the strategic flexibility of the two businesses going forward; and deliver the opportunity for investors to continue to participate in both businesses, which have “distinct risk and reward profiles and capital requirements”.
The Covent Garden element was valued at over £2.5 billion at 31 December 2017, and would be launched as an independent, retail-focused REIT, led by current CEO Ian Hawksworth. Capco say it is expected that a demerger, if pursued, would be formalised by the end of this year.
Ian Hawksworth, Chief Executive of Capco, said: “Capco has achieved significant growth since listing, driving value creation from its two prime central London estates, both of which have positive long-term growth prospects. Underpinned by a strong balance sheet, Capco is well-positioned to support the current capital requirements of both of its prime assets. Against this backdrop, the Board believes the time is right to consider the structure of the business in order to realise the potential of these unique assets and enhance shareholder value.”
As a consequence of the decision, Ian Durant has said he thinks it would be appropriate to put in place his successor to lead the Board through this process and will therefore resign as Chairman. Henry Staunton, the current Senior Independent Director, will become Chairman with effect from 5 June 2018.
Capco have had well-publicised difficulties with their Earls Court project, and are in dispute with the local authority over the West Kensington and Gibbs Green estates. Both were the subject of a conditional land sale agreement by a previous administration, which the current one wants to roll back. Capco are seeking to revise their consented masterplan to take account of the changes in the economic climate since consent was granted.
It could be that the new structure assists the resolution of this issue.