Valad Property Group (Valad) is set to acquire UK funds management group Scarborough for an enterprise value of A$2 billion.
To help fund the acquisition, the Australian-based Valad will raise A$1.2 billion through the issue of new securities under a three for four non-renounceable entitlement offer.
Valad’s executive chairman Stephen Day said the acquisition represents the next step in the group’s strategy to establish European and Australasian platforms for its operations and product offerings.
“In fact, Scarborough represents a ‘European Valad’ with the same breadth and depth of operations as Valad has in Australasia, which will enable us to pursue our European strategy effectively,” Day said.
“It provides Valad with the opportunity to leverage its business model into the UK and European property markets through a highly successful business, which employs over 250 property professionals in 16 offices across 11 countries.”
The latest acquisition builds on Valad’s international expansion headed by Peter Hurley, the group’s executive director and global transactions.
Hurley will move to London to take charge of Valad’s expanded European operations. He is expected to join the Scarborough boards including that of pan-European funds management company Teesland Plc, which is 72.3 per cent owned by Scarborough. Teesland will remain listed on the London Stock Exchange.
Once the acquisition is completed, Valad’s market capitalisation, based on the issue price, will increase to approximately A$2.8 billion, which will place it in the top 100 ASX-listed companies by free-float market capitalisation.
Valad’s assets under management will grow to A$16.8 billion from A$6.6 billion with the inclusion of Scarborough’s operations that consist of a diversified UK and European property portfolio of 89 properties, a 72.3 per cent interest in a listed UK and European real estate funds management business, 50 per cent joint ventures with HBOS, and an integrated property services business.
The vendors of Scarborough will invest A$140 million of their consideration in Valad and further key Scarborough management will make a A$10 million investment in Valad. Stephen Day and Peter Hurley, in aggregate, will subscribe for A$9 million in new securities.
The privately-held Scarborough has substantial direct property ownership, funds management and development operations in the United Kingdom and Europe, with A$10.2 billion in assets under management.
Valad is advised by JP Morgan. JP Morgan, Macquarie Bank and UBS are joint bookrunners and underwriters and Citigroup is co-manager.
