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United We Stand

Posted by Matthew Goddard in ,

Image courtesy of Flickr, Creative Commons

The transaction between Unite Group and Liberty Living Holdings inc (CPPIB) who are owned by Canada Pension Plan Investment Board consists of a cash transaction of £1.4 billion as well as 72.6 million new Unite shares which will make up 20% of the enlarged group. The cash value will in part be raised by the placing of approximately 26.4 million new Unite shares, whilst approximately £310 million is to be drawn from Unite's existing financing facilities and cash resources.

The acquisition of this portfolio will add exposure to new Russell Group universities such as Southampton and Cardiff. Unite currently operates in Bristol, Liverpool, Loughborough, Manchester, Newcastle, Portsmouth and Reading as well as a number of other sites within the UK. The Liberty living portfolio is a "high-quality portfolio" according to Unite, as 82% is aligned to high or mid-ranking universities and 51% of beds are under nominal agreements for 2018/19 with a six-year WAULT.

Unite has also stated that it plans to maintain a dividend payout ratio of 85% for the enlarged group. Unite will also enter into a relationship agreement with CPPIB which will see Thomas Jackson appointed to the board as a Non-Executive Director upon completion of the acquisition. CPPIB has also agreed to a 12-month lock-up from the date of completion.

The Chief Executive Officer of Unite, Richard Smith, stated the following in relation to the Acquisition.

"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."