Unite Group Plc - Acquisition of Liberty Living Group Plc

THE UNITE GROUP PLC (THE "COMPANY" OR "UNITE")

ACQUISITION OF LIBERTY LIVING GROUP PLC
 

 

The Unite Group plc (together with its subsidiary undertakings, the "Group") today announces that it has agreed to acquire Liberty Living Group Plc (together with its subsidiary undertakings, "Liberty Living") from Liberty Living Holdings Inc. ("CPPIB Holdco"), a wholly owned subsidiary of Canada Pension Plan Investment Board ("CPPIB") (the "Acquisition"). The Liberty Living portfolio (defined below) 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.

Unite also today announces a proposed placing of 26,353,664 new ordinary shares (the "Placing") to part fund the cash component of the Acquisition consideration.

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 ("USAF") 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, 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."

 

Presentation for analysts and investors

A presentation for analysts and investors will be held this morning at 8:30 a.m. at the offices of Numis Securities, The London Stock Exchange Building, 10 Paternoster Square, London, EC4M 7LT. Due to security restrictions, all attendees must pre-register their attendance by contacting unite@powerscourt-group.com. Photo I.D. will be required on arrival.

The presentation will also be accessible via a live audiocast available at www.unite-group.co.uk/investors. Alternatively, dial-in details are available on request.

The person responsible for making this announcement on behalf of the Company is Chris Szpojnarowicz, Company Secretary.