Regis gears up for new assault on Grainger as landlord's shares slide

Gould brothers' takeover bid would face strong opposition from chief executive of rival weakened by the collapse in the housing market
Click to follow
The Independent Online

Regis Group, the property investment company run by the Gould brothers, is considering a bid for quoted rival Grainger Trust, 20 months after a failed £885m tilt.

Nick and Peter Gould are understood to want to take advantage of Grainger's share price, which has fallen from 440p in February to barely 210p last week. Although the company is a landlord rather than a builder, it has suffered along with the rest of the quoted housing sector.

However, the brothers are likely to face fierce opposition from Grainger's chief executive, Rupert Dickinson, who rejected an offer of about 700p a share in October 2006 as "significantly" undervaluing the firm.

Sources suggested that Grainger could fetch around £700m, which, although lower than the previous offer, would put a greater premium on the company's current market capitalisation of £270m.

Regis is understood to have approached advisers and banks about its options. Last time the brothers were advised by Merrill Lynch.

The Goulds were described by an industry source as "a little bit sharp – baby versions of the Tchenguiz brothers", the famous property tycoons. Vincent Tchenguiz was even linked to a rival bid for Grainger at the time the original offer collapsed.

Regis Group's activities include acquiring freeholds, a dedicated venture capital arm and owning rental properties from Wales to Essex.

Grainger has 14,000 property assets in the UK, of which approximately 55 per cent are in London and the South-east. The company describes itself as the "largest quoted residential property owner in the UK" and also has portfolios in Germany, the Czech Republic and Estonia.

Grainger's last interim results, for the six months to 31 March, showed revenue at £115.7m, up from £93m in the same period last year. Pre-tax profit fell from £12.1m to £0.2m. Senior banking sources said that Grainger's recent share price problems made it a clear takeover target.

A spokesman for Regis did not return calls from The Independent on Sunday.

q House price figures this week will show a sharp increase in the rate of decline, with the annual fall projected to reach double digits by late summer. Nationwide's annual rate of price fall, 4.4 per cent in May, is expected to be at least 6 per cent for June. The annual fall could be 10 per cent by September or October.

The housing market will be further depressed by a flurry of negative statistics and statements over the next fortnight, with Building Societies Association mortgage lending figures showing a further fall, and major house-builders giving trading updates on the weak market.

In the construction industry, Taylor Wimpey is under pressure to comment on the value of its land bank when it reports on Wednesday, but may choose to delay provisions until its December year-end, when the market may be clearer.

Barratt's year-end is tomorrow, however, and investors are demanding guidance on the extent of its losses and progress in financing its balance sheet. The builder is due to repay £400m of its £1.7bn borrowings this year and may have to admit to breaching loan covenants. With its market value standing at just £225m, it cannot raise new capital through a rights issue or debt-for-equity swap with its bankers. UBS and Credit Suisse are advising it on talks with lenders but these are still likely to increase its interest payments.

Redrow's year-end is this week, too, and its trading update could undermine sentiment in weaker companies.

The Halifax will also report a fall in house prices, but because it now compares prices quarter-on-quarter, it is underestimating the actual fall. The Halifax announced a 3.8 per cent annual decline last month but its May index was 6.4 per cent down on May 2007 and June's true annual fall could be almost 8 per cent.

Comments