AREA, Delancey poised to buy £1.2bn London developer

AREA Property Partners and Delancey have prevailed in a bidding war between private equity real estate firms for London Stock Exchange developer Minerva. Should the bid materialise into a completed transaction, the partners will inherit a portfolio last valued at £1.2bn.

A joint bid by New York-based AREA Property Partners and London-based Delancey is the preferred option to buy London development business Minerva in a deal that would value its shares at £194 million (€222.9 million; $316 million).

The London Stock Exchange-listed company, with £1.2 billion of assets on its books, announced today it had concluded ‘an extensive auction process’ by picking the AREA/Delancey bid ahead of rival bids from ‘a number of parties’.

Minerva had for a number of years struggled to meet its various debt obligations and been subject to regular takeover speculation. Other interested parties for Minerva are believed to have included Goldman Sachs Real Estate Principal Area, Apollo Global Management and Orion Capital Managers, according to the UK national and trade press.

The successful bid, which followed an approximately four-month auction process, was accepted at a cost of 120.5 pence a share. Shares accelerated up 12 percent to 111 pence a share in early morning trading following Minerva’s announcement to the London Stock Exchange, reflecting a premium of more than 20 percent on its closing share price yesterday.

In the announcement, the company said: “Since the company's announcement on 14 January 2011 that it was in discussions regarding a potential offer for the company, the Board has conducted an extensive auction process and has held detailed discussions with a number of parties regarding their interest in the company. The board is of the view that the proposal from the consortium is the most attractive proposal to emerge from that process.”

Other than still needing unanimous shareholder consent, crucially, the bid is still conditional on the assumption by AREA and Delancey of Minerva’s debt obligations, comprising approximately £1 billion of loans maturing at different intervals. Naturally, this would also mean consents being given by Minerva’s main lenders to alter existing loan facility arrangements in areas including a change of company control.

A sale would bring the curtain down on an extensive period of uncertainty for the company. Two years ago, it was reportedly being closely monitored by AREA alongside Fortress, Blackstone and Europa Capital.

But the reality of a bid for Minerva materialised last week when reports surfaced of a shortlist of private equity businesses keen to access its London-centric portfolio. While property values and sentiment has suffered across the UK, London has remained resilient and, in some areas, actually seen rental and capital growth.

Should AREA and Delancey’s bid turn into a deal, the pairing would inherit properties valued at £1.2 billion as of Minerva’s half-year results published in February. These assets include The Walbrook and St Botolphs, both in the City of London, among other properties.