Harworth's stock market listing provides 'limited benefit', says Doncaster Sheffield Airport landowner
Peel Group said it believes Harworth’s stock market listing provides “limited benefit to the company" as it published documents in support of its bid for the regeneration specialist.
Shares in Rotherham-headquartered property regeneration specialist Harworth Group rose by around 20 per cent earlier this month following news of a £583m bid for the company by real estate giant and Doncaster Sheffield Airport landowner Peel.
It was announced in early August that Peel was making a cash offer to acquire the entire share capital of Harworth Group via its subsidiary Peel Pepper at what it said is a “significant premium” of 36 per cent to Harworth’s average share price for the last three months. Peel is a long-term investor in Harworth.
In response Harworth group said its board was “unanimous and unequivocal in its rejection of the offer which, in its view, fundamentally undervalues Harworth and its near and longer-term prospects.”
"The board also believes that the offer has been opportunistically timed to take advantage of a material dislocation between Harworth's share price and the value of its underlying assets, driven predominantly by macroeconomic factors.”
The Peel Group has published the offer document containing the full terms and conditions of its cash offer to acquire Harworth Group.
The statement said: “Peel believes Harworth's cash flow profile is increasingly becoming less sustainable, driven partly by Harworth's increasing administrative cost base and increasing net finance costs , which are significantly higher than its passing rental income.
"Over the last four financial years, Harworth’s administrative expenses and net finance costs alone have increased 103.2 per cent.”
Harworth has delivered annualised total accounting returns of just 3.9 per cent per annum over the last four accounting years. Peel Group said.
"Peel considers Harworth's direct development and hold strategy to be capital-intensive, slow to deliver value and increasingly unable to generate appropriate risk adjusted returns.
"As a result, Peel believes the business should pivot toward strategic land activities and selective development, a model that has a lower cost base and is more effectively executed within a private-company structure
“In addition, Peel believes Harworth's data centre / powered land strategy is still very early stage, highly speculative and unlikely to convert to cash sales or deliver the contribution required to improve the overall returns of the business to an acceptable level within the short to medium term.”
"The offer of 172.5 pence per share provides Harworth Shareholders with certainty of value in cash for the entirety of their shareholdings at a significant premium of 36.9 per cent to the volume-weighted average share price over the last one-month period and 36.0 per cent to the volume-weighted average share price over the last three-month period.”
Peel said it also believes Harworth's stock market listing provides limited benefit to the company.
The statement continued: “Harworth has not raised new equity in the last nine years, and Peel believes Harworth would not be able to raise new equity accretively today, given its consistent discount.”
Harworth group has been approached for comment.