City urges Ritblat to merge

Calls grow for Canary Wharf link-up
Click to follow
The Independent Online

Leading investors in British Land are calling for the property company, chaired by John Ritblat, to be merged with Canary Wharf Group to create a central London-focused group.

Leading investors in British Land are calling for the property company, chaired by John Ritblat, to be merged with Canary Wharf Group to create a central London-focused group.

Institutional shareholders are increasingly frustrated by British Land executives' inability to inject some pazazz into the shares, and merging with another group is now being touted as a solution. But such a move would need aggressive shareholder action as Mr Ritblat is renowned for his strong will and determination.

Since April 1999 British Land shares have fallen by 29 per cent and now trade at about a 40 per cent discount to the net value of its assets. Its shares have not properly recovered since Mr Ritblat failed to buy a stake in rival property company, Liberty International - thought to be a precursor to a full bid.

One major shareholder, who asked not to be named, said: "Being a British Land shareholder isn't much fun at the moment. To push them in the right direction requires something radical. A merger with Canary Wharf would be the obvious thing." Shareholders include Schroders, Merrill Lynch, Jupiter and Fleming.

The source said British Land and Canary Wharf would make a good fit, creating a FT-SE 100 property firm focused on central London - regarded as the best UK property market. One of British Land's biggest assets is the City's Broadgate office complex, which it has gradually bought up for £900m.

Canary Wharf has also been singled out as a good fit as it is one of the best-performing property stocks on the FT-SE. Since floating in March, it has overtaken British Land as the UK's second largest property company by market capitalisation, with a 52 per cent rise in share price. In last week's FT-SE 100 reshuffle, it narrowly missed out on promotion.

The company owes its success to its highly rated management, headed by chief executive George Iacobescu, and to a recent string of announced moves to Docklands. Most recently, Enron said it would move into a specially constructed tower. Deutsche Bank is also thought to be considering moving its 10,000 employees to Canary Wharf as part of restructuring its London operation.

Despite shareholder enthusiasm for a merger, City analysts are sceptical. John Atkins, property analyst at HSBC, said: "I can't see why Canary Wharf's shareholders would be interested. The main attraction with Canary Wharf is that it's a nice, clean, simple story. Its interests are in one location with state-of-the-art buildings and superb management. Why muddy that?"

It is also thought Canary Wharf shareholders are looking forward to higher dividends as cash flow rises with rent reviews.

But Mr Ritblat may be the biggest problem, as he would not voluntarily step down as chairman or chief executive. But he has indicated that he may hand over in part to his son, Nick.

Comments