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Capco considering demerger, chairman Durant heading for the door
Capital & Counties said on Thursday that it's considering a demerger that would create two separately-listed businesses based around its Covent Garden and Earls Court estates, as it announced the departure of chairman Ian Durant.
The Covent Garden estate, which was valued at more than £2.5bn at the end of December 2017, would be launched as an independent central London retail-focused REIT, led by Ian Hawksworth. Meanwhile, Gary Yardley would head up a London development company centred around the Earls Court estate, Capco's share of which was valued at £759m at the end of December.
Capco said a demerger would enhance the strategic flexibility of the two businesses going forward and allow investors to continue to participate in both, which have distinct risk and reward profiles and capital requirements, "enabling each business to attract the most appropriate shareholder base to support its own strategic development".
Chief executive Hawksworth 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."
The company also said that Ian Durant is planning to resign as chairman.
"As a consequence of the board's decision to consider a demerger, Ian Durant has informed the board that, whilst he is fully supportive of the board's decision to consider a demerger, in light of his eight-year tenure as chairman and external commitments, he believes it would be appropriate to put in place his successor to lead the board through this process."
Numis said it agrees with the rationale of the split from a strategic point of view, adding that it has long considered the two assets as "sitting awkwardly together on one balance sheet".
"The split is not without its challenges and it will be interesting to see, among other things, how the group's capital will be split. Assuming the demerger proceeds, we would expect Covent Garden to trade towards SHB's equity rating (par) while Earls Court's equity rating would likely fade given uncertainties around the outlook and the not inconsequential delivery risks.
"In the near term, we believe the market will respond positively to today's announcement despite there being multiple questions for management to address."
At 1010 BST, the shares were up 0.9% to 298.30p.