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The Unite Group

The Unite Group plc proposed placing to acquire Liberty Living Group Plc

The Unite Group plc (LON: UTG) today announced a proposed placing of 26,353,664 new ordinary shares in the Company to institutional investors. The Placing is being conducted through an accelerated bookbuild which will be launched immediately following release of this announcement.

Use of Proceeds of the Placing

As announced separately today, Unite has agreed to acquire Liberty Living Group Plc from Liberty Living Holdings Inc., a wholly owned subsidiary of Canada Pension Plan Investment Board. The Liberty Living portfolio is a high quality portfolio of purpose built student accommodation comprising 24,021 beds and was independently valued at £2.2 billion as at 31 May 2019.

The Acquisition has been priced on a NAV-for-NAV basis (subject to certain adjustments) for a total consideration of £1.4 billion. The transaction consideration is comprised of a combination of cash and shares:

· CPPIB Holdco to receive approximately 72.6 million new Unite shares representing 20% of the enlarged group upon completion of the Acquisition

· Approximately £240 million from the net proceeds of the Placing will be used to part fund the cash consideration

· Approximately £310 million will be drawn from Unite’s existing financing facilities and cash resources to part fund the cash consideration

· As part of the transaction, the Unite Student Accommodation Fund will acquire Liberty Living’s properties in Cardiff for cash consideration of £253 million

The Placing is not conditional upon the Acquisition – if the Acquisition does not complete then the net proceeds of the Placing will be retained for use in connection with Unite’s development and partnership pipeline or for general commercial activities, or a combination thereof.

Capitalised terms used but not defined in this announcement have the same meanings as set out in the Company’s separate announcement regarding the Acquisition.

Details of the Placing

J.P. Morgan Securities plc, which conducts its UK investment banking activities as J.P. Morgan Cazenove and Numis Securities Limited are acting as joint bookrunners in connection with the Placing.

J.P. Morgan Cazenove and Numis Securities will commence a bookbuilding process in respect of the Placing. The book will open with immediate effect. The Joint Bookrunners have entered into an agreement with Unite under which, subject to the conditions set out therein, the Joint Bookrunners will agree to use their respective reasonable endeavours to procure subscribers for the Placing Shares at a price determined following completion of the Bookbuild and as set out in the Placing and Sponsor’s Agreement. The Placing is subject to the terms and conditions set out in the appendix A to this announcement. Members of the public are not entitled to participate in the Placing.

The Placing Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing issued Ordinary Shares of Unite. This includes the right to receive all dividends and other distributions declared or paid in respect of such Ordinary Shares after the date of issue of the Placing Shares. The Placing Shares will be entitled to the interim dividend for the six months ended 30 June 2019. The price per Ordinary Share at which the Placing Shares are to be placed will be determined at the close of the Bookbuild. Details of the number of Placing Shares and the Placing Price will be announced as soon as practicable after the closing of the Bookbuild.

Application will be made for the Placing Shares to be admitted to the premium listing segment of the Official List of the Financial Conduct Authority and to trading on the main market for listed securities of the London Stock Exchange plc. It is expected that Admission will take place at or around 8.00 a.m. (London time) on 5 July 2019 (or such later date as may be agreed between the Company and the Joint Bookrunners). The Placing is conditional upon, inter alia, Admission becoming effective. The Placing is also conditional upon the Placing and Sponsor’s Agreement not being terminated in accordance with its terms.

Prior to launch of the Placing, the Company consulted with a significant number of its Shareholders to gauge their feedback as to the transaction and the terms of the Placing. Feedback from this consultation was supportive and as a result the Board has chosen to proceed with the Placing to part finance the Acquisition through an equity raise which will ensure the Enlarged Group LTV ratio is limited to approximately 40% immediately following Completion. The Placing is being structured as a Bookbuild to minimise execution and market risk. The Board intends to apply the principles of pre-emption when allocating Placing Shares to those investors that participate in the Placing. The Placing Shares will be issued pursuant to the allotment and disapplication of pre-emption authorities that Shareholders granted to the Company at its annual general meeting on 9 May 2019.

Risk factors

Prospective investors in the Placing Shares should consider fully and carefully the risk factors associated with the Company, the Placing, the Placing Shares and the Acquisition. The person responsible for making this Announcement on behalf of the Company is Chris Szpojnarowicz, Company Secretary.

The Unite Group plc has agreed to acquire Liberty Living Group Plc (together with its subsidiary undertakings, “Liberty Living”) from Liberty Living Holdings Inc., a wholly owned subsidiary of Canada Pension Plan Investment Board. The Liberty Living portfolio is a high quality portfolio of purpose built student accommodation comprising 24,021 beds and was independently valued at £2.2 billion as at 31 May 2019.

The Acquisition has been priced on a NAV-for-NAV basis (subject to certain adjustments) for a total consideration of £1.4 billion. The consideration is comprised of a combination of cash and shares that will result in CPPIB Holdco receiving a stake of 20% in the Enlarged Group upon Completion.

Transaction highlights

· A transformative acquisition which:

― Leverages Unite’s scalable and best-in-class operating platform (PRISM) to deliver £15m of annual cost synergies from 2021

― Sustains Unite’s medium term rental growth outlook

― Delivers material earnings accretion from 2020 onwards and enhances Unite’s earnings yield

· Liberty Living is a high quality portfolio and is complementary to Unite’s focus on well located properties and strong earnings visibility

― 82% of the Liberty Living portfolio is aligned to high and mid-ranked universities

― 51% of the Liberty Living portfolio is let under nomination agreements (for the 2018/19 academic year) with a 6 year WAULT

― Adds exposure to new Russell Group universities in Southampton and Cardiff

· Operational enhancements to be delivered by combining the best of both businesses

― Integration phase will leverage university relationships and best practices from Liberty Living’s operations

― Opportunities to further strengthen Unite’s product and service proposition, including a more tailored customer offer and enhanced talent and skills

· Total consideration of £1.4 billion on a NAV-for-NAV basis (subject to certain adjustments), comprising cash of £0.8 billion and shares of £0.6 billion

― CPPIB Holdco to receive approximately 72.6 million new Unite shares representing 20% of the Enlarged Group upon Completion (based on a Unite adjusted EPRA NAV per share of 827 pence as at 31 March 2019[1])

― Approximately £240 million to be raised from the net proceeds of a proposed placing of 26.4 million new Unite shares and approximately £310 million to be drawn from Unite’s existing financing facilities and cash resources to part fund the cash consideration

― As part of the transaction, the Unite Student Accommodation Fund will acquire Liberty Living’s properties in Cardiff for cash consideration of £253 million

· Conservatively financed Acquisition

― LTV for the Enlarged Group immediately following Completion is expected to be approximately 40% with a target of 35% following planned disposals

― Enlarged Group disposal plan of £150-200 million per annum over the next three years

― Ensures capacity to maintain c.2,000 bed annual development run-rate

· Unite plans to maintain its 85% dividend payout ratio for the Enlarged Group

· Unite will enter into a Relationship Agreement with CPPIB Holdco and Thomas Jackson will join the Board as a Non-Executive Director upon Completion of the Acquisition. CPPIB Holdco have agreed to a 12 month lock-up from the date of Completion

· The Acquisition is a Class 1 transaction for Unite under the Listing Rules and accordingly requires the approval of Shareholders

― Unite expects to publish a shareholder circular later today to convene a general meeting for approval of the Acquisition on 23 July 2019

· Completion of the Acquisition is conditional upon CMA clearance

· Completion is anticipated to occur by the end of Q3 2019

Richard Smith, Chief Executive Officer of Unite Group, commented:

“This is a transformative acquisition which brings together the best of two companies with a wealth of expertise and experience in delivering for students and university partners. By combining two highly complementary portfolios, the enlarged group will be well positioned to meet the growing need for affordable, high quality student accommodation in university towns and cities where demand is strong.

This, combined with our best-in-class operating platform, will mean more choice for universities and an enhanced service and welfare offer for students.

Backed by a conservative capital structure, this acquisition accelerates and extends our earnings growth and provides opportunities to further enhance total shareholder returns.”

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