Kennedy-Wilson Holdings, Inc., a global real estate investment company, and Kennedy Wilson Europe Real Estate Plc , an LSE listed property company that invests in direct real estate and real estate loans in Europe, announced that they have reached agreement on the terms of a recommended all-share combination transaction that will create a leading global real estate investment and asset management platform. As a result of the transaction, KWE will become a wholly owned subsidiary of KW.

The transaction will be effected by means of a court-sanctioned scheme of arrangement under Article 125 of the Jersey Companies Law. Under the terms of the transaction, each KWE shareholder will be entitled to receive 0.667 new KW shares for each KWE share held by it. Based on the US$22.50 closing price of KW shares on April 21, 2017, the last trading day prior to the announcement, and a GBP / USD exchange rate of 1.2779, the implied value per share of KWE is 1,174 pence, which represents a premium of approximately 20.0% to the closing price of 979 pence per KWE share on April 21, 2017 and 22.4% to the volume weighted average closing price of 960 pence per KWE share for the three month period ended April 21, 2017. Based on pro forma ownership, existing KW shareholders will own approximately 64% and former KWE shareholders will own approximately 36% of KW following completion of the transaction.

William J. McMorrow, Chairman and Chief Executive Officer of KW, said, “This transaction represents one of the most significant milestones in our 40-year history. The combination will create a leading global real estate investment and asset management platform with enhanced diversification supported by the continuity of leadership with a strong, proven track record. The enterprise will benefit from greater scale and improved liquidity, which will enhance our ability to generate attractive risk-adjusted returns for our shareholders. The transaction significantly improves our recurring cash flow profile, and, as such, we are pleased to announce our intention to increase our first quarterly dividend by approximately 12% upon completing the transaction, which demonstrates our confidence in the combination and our long-term prospects.”

Charlotte Valeur, Non-Executive Chair of KWE, said, “I and the other independent directors of KWE are very pleased to announce that we have reached agreement on the terms of an all-share transaction between KW and KWE, which will give KWE shareholders the opportunity to gain exposure to a diversified asset base.”

Strategic & Financial Benefits of the Transaction

KW believes that the transaction:

  • Creates a leading real estate investment and asset managementplatform with increased scale and liquidity, having a combined market capitalization of approximately US$4.0 billion and an enterprise value of approximately US$8.2 billion. Given this increased scale, KW will receive greater weighting in key US stock indices following the completion of the transaction, including the Russell 2000 (in which it is expected to be the fourth largest real estate company by market capitalization) and the Russell 3000, enhancing liquidity in the stock and broadening the potential investor base;
  • Creates a global portfolio of over 400 properties with an enhanced geographic mix and broad diversification across real estate sectors;
  • Provides flexibility to allocate capital globally across asset classes and geographic markets. KW’s approximately 400 employees in the United States and approximately 100 employees in Europe provide the knowledge base to continue to make investment decisions that offer attractive risk-adjusted returns on capital. Additionally, KW’s enhanced scale and profile may result in greater access to capital and an expanded set of acquisition and development opportunities;
  • Establishes a company with a strong pro forma capital structure, with pro forma leverage of approximately 51% net debt to enterprise value, access to diverse, global equity and debt capital sources, and approximately US$1.4 billion of pro forma liquidity (as of December 31, 2016) to support growth;
  • Generates certain synergies resulting from the elimination of duplicative public company costs, and potential additional income arising from KW’s ability to manage capital more efficiently as a result of the combination, which is expected to result in expanded capacity for investment to drive growth; and
  • Will be accretive to adjusted net income per share immediately following the closing and provides the potential to increase cash flows available for shareholder distribution. KW intends to increase its first quarterly dividend by approximately 12% upon completion of the transaction.

Source: Kennedy-Wilson Holdings

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