Blackstone Lifts Bid for U.K. Landlord St. Modwen Properties

Blackstone Group Inc. has increased its offer for U.K. warehouse and home developer St. Modwen Properties Plc to 560 pence a share, valuing the company at 1.27 billion pounds ($1.77 billion).

The final offer, which has been recommended to shareholders by St. Modwen’s board, so far has the backing of about 11% of the company’s investors, Blackstone said in a statement Thursday. The private-equity giant’s previous 542 pence a share offer was met with resistance from J O Hambro Capital Management Ltd., one of its biggest shareholders.

A deal would hand Blackstone a large pipeline of development land for warehouses in the U.K., where competition for logistics properties is intense. Blackstone has been racing to scale up its Mileway unit that focuses on urban warehouse properties close to population centers that are in demand from online retailers seeking to cut delivery times.

Blackstone’s increased offer “is a begrudging acceptance by Blackstone that it is underpaying for this asset,” said Alex Savvides, a senior fund manager at J O Hambro.

“That we got any increase at all is a win for shareholder stewardship, engagement and activism,” Savvides said by email Thursday. “It was always going to be a difficult battle to fight.”

The revised offer represents a 25% premium to St. Modwen’s share price on the day before the bid was announced in early May, and a 21% premium to the company’s net asset value. Shareholders Aviva Plc and Aberdeen Standard Investments said they would support the improved offer, in separate statements Thursday.

Shares of St. Modwen were up 1.1% to 557 pence at 1:54 p.m. Thursday in London. The landlord has been trading above Blackstone’s original offer price for the past month, as hedge funds piled into the company’s shares betting on a revised offer.

Berry Street Capital Management, an event-driven hedge fund started by former Paulson Europe partner Orkun Kilic, raised its stake in the firm to 1.23% this week. The improved proposal represents a “fairer” premium to St. Modwen’s net asset value, a representative for Berry Street said Thursday.

Lazard Ltd., JPMorgan Chase & Co. and Numis Corp. are advising St. Modwen on the offer while Rothschild & Co. is advising Blackstone.

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