UK property developer St Modwen accepts new offer from US private equity group

Property developer St Modwen has accepted an increased offer from US investor Blackstone that values the company at £1.3bn, in the latest example of a private equity swoop for a mid-sized British firm.

St Modwen has agreed to a price of 560p per share in a final offer from Blackstone’s vehicle. The bid was 25% above the share price of 448p per share on the day before New York-based Blackstone’s interest was first revealed in early May. Shares rose 0.5% on Thursday morning to 554p.

Private equity investors from outside the UK were already sitting on big piles of cash before the pandemic, and have since pounced on British companies, which are seen as undervalued, in part because of uncertainty over whether a Brexit trade deal with the EU would be agreed.

Other British companies targeted by US investors include the supermarket chain Morrisons, aerospace manufacturer Senior, and infrastructure investor John Laing. Foreign private equity investors have invested more so far in 2021 than in any year since 2007, according to Dealogic, a data company.

St Modwen, a member of the FTSE 250 index of mid-sized companies, struggled during the coronavirus pandemic, losing £120m during the year to the end of November after writing down the value of residential land and retail assets as lockdowns began.

The company was already reducing its exposure to physical retail sites and office buildings, as well as land regeneration projects such as the old MG Rover factory at Longbridge in the West Midlands. It is instead focusing on two areas that have benefited from pandemic trends: the boom in online deliveries and in house prices. Investments in warehouses have jumped in value. About £1.37bn in logistics assets accounted for 49% of the value of its portfolio at the end of 2020, a big increase from the 40% in 2019. In the housing sector St Modwen is targeting 25% growth for 2021.

St Modwen shareholders successfully argued that Blackstone’s initial bid of 542p per share was too low, being only slightly above the company’s pre-pandemic high valuation of 530p per share. Shares fell to almost 300p per share in 2020.

Blackstone said the terms of the latest offer were final, but that it reserved the right to make a higher bid if another potential buyer stepped into the frame.