Published Monday, 17 January 2011
Property group Minerva has built up a 16% rise after news late on Friday that it was in preliminary takeover talks.
It made the usual cautious noises about the discussions being at a very preliminary stage and there being no certainty any offer would be made, but this has not stopped the company's shares from climbing 14p to 101p.
Analysts immediately suggested the predator was likely to be Kifin, the group run by South African investor Nathan Kirsch which owns 29.5% of the company. At the end of 2009 Kirsch made a 50p a share offer for Minerva, which is behind the Walbrook building in the City of London and wants to develop the former Young's Brewery in South London. Minerva published an estimated net asset value of 95p a share at the time and the bid failed. Since then Kirsch has been - unsuccessfully - lobbying to oust Minerva's chief executive Salmaan Hasan and chairman Oliver Whitehead. Analyst Michael Burt at Espirito Santo said:
A bid from Kifin has always felt like the most likely scenario for Minerva, which remains a curious listed entity. Minerva's status as a listed company is potentially more of a hindrance than a help at present given that the refinancing of its £860m debt pile and letting of its two City office schemes (the Walbrook and St Botolphs) may be easier to negotiate without public scrutiny. Any bidder for Minerva would have to navigate through the company's significant refinancing hurdles and given the lack of public disclosure surrounding the balance sheet, it strikes us that Kifin would be the only viable bidder.
Assuming a letting of the two city office schemes (770,000 square feet) and the completion and sale of the remaining units at Lancaster Gate, we are able to reach a best case pro forma net asset value of around 180p. There are significant risks to delivering this value, most notably an increasingly competitive pre-let market in the City office sector and the requirement to refinance around 15% of debt in the year to June 2012. We would expect any bidder to dismiss this best case scenario and instead focus on a price somewhere between 132p and 79p.
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