Harworth steps up defence against takeover bid
The Yorkshire property group has stepped up its defence against Peel Group’s 172.5p/share takeover bid, claiming the business has potential value of almost 300p/share and unveiling plans to accelerate its own strategy for growth.
The listed land and property regeneration business has published its formal response to Peel’s unsolicited cash offer, which it has unanimously rejected as “fundamentally” undervaluing the company.
Harworth said its underlying EPRA net disposal value stood at 214.8p per share at the end of June, meaning Peel’s offer represents a 19.7% discount. But it also said this figure did not capture significant potential value embedded in its development pipeline.
Harworth estimates that, when its underlying asset value is combined with potential value from its data centre and industrial and logistics portfolios, as well as recurring income from power purchase agreements, the group could be worth 297.4p per share, which represents a 42% discount to the value it has calculated for the group under its assessment.
Property adviser JLL has assessed the potential net realisable value of Harworth’s existing land portfolio suitable for data centre development at £293m, while its near-to-medium-term industrial and logistics development pipeline has a potential net realisable value of £174m.
Harworth stressed that these figures are not valuations and are based on assumptions around the successful delivery of power, planning, servicing and development milestones.
The company is also using its response to set out an accelerated strategy aimed at unlocking this value itself.
It plans to become a “pure play” powered land and industrial and logistics specialist, while exiting the residential sector.
The strategy will see Harworth refocus on strategic land, enabling works and selective development, resize its investment portfolio, and align its operating model and cost base with the new approach.
The business said implementation of the strategy was already under way and that it was targeting a low double-digit total accounting return in the longer term.
It also said the board would consider returning some or all surplus capital generated through material asset sales to shareholders.
Harworth described Peel’s offer as “highly opportunistic”, arguing that it had been timed to take advantage of the gap between its share price and the underlying value of its assets amid wider weakness across the UK listed real estate sector.
It also claimed Peel would benefit from around £30.7m in stamp duty savings, equivalent to 9.5p per Harworth share, through acquiring the business via a takeover rather than direct property transactions.
Harworth’s directors, advised by Barclays and Peel Hunt, said they did not consider the offer fair or reasonable and unanimously recommended that shareholders reject it.
The latest move marks a further escalation in the increasingly public battle between the two businesses. Peel initially made an unsolicited approach for Harworth before going public with criticism of the company’s performance and arguing that it could run the business more effectively.
Peel subsequently launched its formal £172.5p-a-share offer, which Harworth has now urged shareholders to reject. Harworth shareholders who have not accepted the offer have been told to take no action.
