The boards of directors of Unite Group PLC (LON:UTG) and Empiric Student Property plc have announced that they have reached agreement on the terms of a recommended cash and share offer pursuant to which Unite will acquire the entire issued and to be issued ordinary share capital of Empiric. It is intended that the Acquisition will be effected by means of a scheme of arrangement under Part 26 of the Companies Act.
Key terms
Under the terms of the Acquisition, for each Empiric Share held, the Scheme Shareholders will be entitled to receive:
0.085 New Unite Shares and 32 pence in cash
Based on Unite’s closing share price of 732.0 pence as at the Latest Practicable Date, and excluding the Empiric Q2, Q3 and Q4 dividends which are expected to be declared and paid to Empiric Shareholders prior to the Effective Date (“Empiric 2025 Dividends”), the Acquisition values each Empiric Share at approximately 94.2 pence and Empiric’s entire issued and to be issued share capital at approximately £634 million. The terms of the Acquisition imply an EPRA NTA discount of 3.7 per cent. based on each of Unite’s and Empiric’s EPRA NTAs per share as at 30 June 2025 (excluding the Empiric 2025 Dividends).
Based on Unite’s closing share price of 855.5 pence as at 4 June 2025 (being the last Business Day prior to the commencement of the Offer Period) (the “Last Undisturbed Trading Date”), and, in addition, the Empiric 2025 Dividends, the Acquisition values each Empiric Share at approximately 107.5 pence (the “Total Transaction Value”) and Empiric’s entire issued and to be issued share capital at approximately £723 million, representing:
· a premium of approximately 10 per cent. to Empiric’s closing share price of 97.3 pence as at the Last Undisturbed Trading Date;
· a premium of approximately 22 per cent. to Empiric’s three-month volume-weighted average price of 88.3 pence as at the Last Undisturbed Trading Date; and
· a premium of approximately 24 per cent. to Empiric’s six-month volume-weighted average price of 86.6 pence as at the Last Undisturbed Trading Date.
Immediately following Completion, Empiric Shareholders will hold approximately 10 per cent. of the issued share capital of the Enlarged Group and existing Unite Shareholders will hold approximately 90 per cent. of the issued share capital of the Enlarged Group.
The Scheme Document will contain full details of the Acquisition and the Scheme.
Highlights of the Acquisition
The acquisition of Empiric’s high quality, complementary portfolio provides Unite with greater scale and enhanced growth opportunities aligned to the UK’s strongest universities. Empiric’s differentiated customer proposition enables Unite to appeal to a broader customer base – at pace and at scale, and at a discount to estimated replacement cost – through increased exposure to the attractive segment for “returner” students (non-first year undergraduates and postgraduate students) which is largely unaddressed by “conventional” PBSA. With the benefit of substantial cost synergies, the Acquisition is expected to deliver earnings, and dividend accretion and enhanced returns for both companies’ shareholders; while maintaining balance sheet strength. The Acquisition would result in:
· a £10.5 billion combined portfolio (Unite share: £7.4 billion) in the UK’s strongest universities, with c.75,000 beds on a combined basis of which 92 per cent. are located in Russell Group cities;
· a platform for expansion in the attractive returner segment through a proven platform (representing c.11 per cent. of the Enlarged Group’s portfolio value, with scope to increase to c.15-20 per cent. over time through conversions and future acquisitions) delivering a significant increase in Unite’s addressable market, and enabling Unite to attract and retain students throughout their academic journey including the c.35,000 first-year students currently living with Unite;
· a dedicated high-quality product and service offering under the Hello Student brand, tailored to the needs of returner students and aligned with the UK’s strongest universities;
· significant cost synergies of £13.7 million unlocked though Unite’s best-in-class operating platform;
· earnings and dividend accretion for both sets of shareholders, from the first full year of ownership for Empiric Shareholders and in the second full year of ownership for Unite Shareholders (neutral in the first) as synergies are delivered;
· a low double-digit unlevered IRR ahead of Unite’s cost of capital and supporting total accounting returns of c.10 per cent. p.a.; and
· the maintenance of a high-quality balance sheet, with pro forma net debt / EBITDA of 5.9x, net LTV of 29 per cent., a weighted average cost of debt of 4.1 per cent., a weighted average debt maturity of 3.6 years and £570 million of undrawn debt facilities, in each case as at 30 June 2025 adjusted for the impact of the cash consideration.
In arriving at its recommendation of the Acquisition, the Empiric Board also notes the specific benefits for Empiric Shareholders, including:
· based on Unite’s closing share price as at the Last Undisturbed Trading Date, approximately 69 per cent. of the Acquisition consideration is payable in New Unite Shares, providing Empiric Shareholders with a tax-efficient means of remaining invested in the UK PBSA sector via the enlarged vehicle with exposure to the compelling strategic and financial benefits set out above;
· based on Unite’s closing share price as at the Last Undisturbed Trading Date, approximately 31 per cent. of the Acquisition consideration is payable in cash, providing Empiric Shareholders with significant liquidity at a premium to Empiric’s closing share price on the Last Undisturbed Trading Date, while underpinning the value of the Acquisition as a whole. In addition, on an EPRA NTA basis, the cash consideration allows Empiric Shareholders to realise the equivalent of approximately 27 per cent. of Empiric’s EPRA NTA per Empiric Share of 120.2 pence as at 30 June 2025;
· the compelling financial effects of the combination in respect of the New Unite Shares, including:
§ participating in the synergy benefits arising from the Acquisition that Unite as an established, publicly listed PBSA operator of scale is uniquely qualified to deliver;
§ material earnings and dividend accretion, with an implied uplift of 36 per cent. and 30 per cent. in earnings and dividend per share, respectively based on 2024 earnings and dividends, prior to synergies; and
· the cost of capital benefits through holding shares in a FTSE 100 constituent with an investment grade credit rating, where the greater liquidity in the trading of Unite Shares compared with Empiric Shares would allow Empiric Shareholders to trade in and out of the Unite Shares should they wish to do so.
Recommendation
The Empiric Directors, who have been so advised by Peel Hunt and Jefferies as to the financial terms of the Acquisition, consider the terms of the Acquisition to be fair and reasonable. In providing their financial advice to the Empiric Directors, Peel Hunt and Jefferies have taken into account the commercial assessments of the Empiric Directors.
Accordingly, the Empiric Directors intend unanimously to recommend that Empiric Shareholders vote in favour of the Scheme at the Court Meeting and the Resolution to be proposed at the General Meeting, as the Empiric Directors have irrevocably undertaken to do in respect of their own holdings of Empiric Shares, representing approximately 0.06 per cent. of Empiric’s issued share capital as at the Latest Practicable Date.
Pre-Completion dividends
In addition to the New Unite Shares and cash consideration received by Scheme Shareholders in connection with the Acquisition, the Empiric Board will be entitled to pay certain agreed ordinary course Empiric dividends to Empiric Shareholders prior to the Effective Date, full details of which are set out in this Announcement.
Following the Acquisition becoming Effective, the Unite Directors expect that dividends will continue to be paid in accordance with Unite’s existing dividend timetable.
Transaction structure and timetable
It is intended that the Acquisition will be implemented by way of a court-sanctioned scheme of arrangement of Empiric under Part 26 of the Companies Act, further details of which are contained in the full text of this Announcement. Unite reserves the right to implement the Acquisition by way of a Takeover Offer, subject to the Panel’s consent and the terms of the Co-operation Agreement.
The Acquisition will be made in accordance with the Code and on the terms and subject to the satisfaction or waiver (as applicable) of the Conditions and certain further terms set out in Appendix 1 to this Announcement and to the full terms and conditions which will be set out in the Scheme Document. These Conditions include, amongst others:
· the approval of the Scheme by a majority in number of Scheme Shareholders present and voting, either in person or by proxy, at the Court Meeting, representing at least 75 per cent. in value of the Scheme Shares voted by Scheme Shareholders of the Court Meeting. In addition, the Resolution must be passed by the requisite majority of Empiric Shareholders at the General Meeting;
· the CMA either:
o issuing a decision that it is not the CMA’s intention to make a Phase 2 CMA Reference, with such a decision being issued unconditionally or else conditional on the CMA’s acceptance of undertakings in lieu of a Phase 2 CMA Reference (“UILs”) offered by Unite which are reasonably satisfactory to Unite, having regard to both the impact on overall portfolio value and the alignment of any assets subject to UILs to key universities, in particular Russell Group universities (or the applicable time period for the CMA to make a Phase 2 CMA Reference having expired without a Phase 2 CMA Reference having been made) (“CMA Phase 1 Clearance Condition”); or
o in the event that a Phase 2 Reference is made and the CMA Phase 1 Clearance condition cannot be invoked, confirming that the proposed acquisition of Empiric by Unite may proceed (i) without any undertakings or conditions or (ii) the CMA has decided to accept undertakings from, or imposed an order, on Empiric and/or Unite in order to allow the proposed acquisition of Empiric by Unite and any matter arising therefrom or relating thereto to proceed, provided such undertakings or orders are on terms reasonably satisfactory to Unite, having regard to both the impact on overall portfolio value and the alignment of any assets subject to UILs to key universities, in particular Russell Group universities (“CMA Phase 2 Clearance Condition”);
(together, the “CMA Condition”); and
· the sanction of the Scheme by the Court.
The Scheme Document will contain full details of the Acquisition and the Scheme, together with notices of the Court Meeting and the General Meeting and the expected timetable of the Scheme and will specify the action to be taken by Empiric Shareholders. It is expected that the Scheme Document will be despatched to Empiric Shareholders (together with the Forms of Proxy) within 28 days of this Announcement (unless otherwise agreed by the Panel, Unite and Empiric).
The Scheme is expected to become Effective by the second quarter of 2026, subject to the satisfaction or waiver of (as applicable) the Conditions and certain further terms set out in Appendix 1 to this Announcement and to the full terms and conditions to be set out in the Scheme Document.
An expected timetable of the key events of the Acquisition will be set out in the Scheme Document.
Commenting on the Acquisition, Mark Pain, Chair of Empiric said:
“Over the last few years, the Board and management of Empiric has implemented a successful transformation strategy, aligning the company’s portfolio to the best locations in the UK’s strongest university cities. Unite has identified Empiric’s differentiated proposition through its Hello Student brand, as well as its focus on returner and post graduate students, as clear strategic pillars through which to grow its business.
The Board of Empiric believes the firm and recommended offer from Unite is highly compelling for Empiric’s shareholders as it will deliver material accretion to earnings and dividends per share, deliver synergy benefits and provide superior access to capital to drive growth, whilst enabling shareholders to remain invested in a portfolio of highly attractive UK student accommodation assets.”
Commenting on the Acquisition, Richard Huntingford, Chair of Unite Group said:
“Acquiring Empiric’s high-quality and complementary portfolio accelerates our growth into the attractive returner student segment, enabling us to better serve students throughout their academic journey.
Unite is uniquely positioned to unlock significant synergies and accelerate earnings growth for both sets of shareholders. Alongside university partnerships and our significant development pipeline, the acquisition provides a new growth driver to deliver enhanced scale and long-term value for shareholders.”
