Capital & Counties board announces possible demerger

Board meeting

Capital & Counties Properties’ board have announced its consideration of a demerger, which would result in two separately listed businesses based around its prime central London estates, each with its own district investment prospects:

The first being Covent Garden; a world-class destination in central London, independently valued at over £2.5 billion at 31 December 2017, to be launched as an independent, prime central London retail-focused REIT, led by Ian Hawksworth.

The second is a London development company, centred around the Earls Court master plan which represents one of the most important large scale strategic opportunity areas in central London, led by Gary Yardley.

Capital & Counties’ share of property interests at Earls Court was independently valued at £759 million at 31 December 2017 (adjusted for the sale of The Empress State Building).

The group’s board regularly reviews the structure of the business to ensure that it is maximising long-term value creation for shareholders, taking into account the changing income profile and the scale of the Covent Garden business, together with the completion of the final phase of demolition at Earls Court. The board believes that the separation of the two estates (into independent businesses) would generate a number of benefits including:

  • Enhancing the strategic flexibility of the two businesses going forward and;
  • The opportunity for investors to continue to participate in both businesses, which have distinct risk and reward profiles and capital requirements, enabling each business to attract the most appropriate shareholder base to support its own strategic development.

If pursued, the assumption is that a demerger would be formalised by the end of 2018. Further announcements wll be made in due course as appropriate.

Ian Hawksworth, Chief Executive of Capco, commented:

Capco has achieved significant growth since listing, driving value creation from its two prime central London estates, both of which have positive long-term growth prospects. Underpinned by a strong balance sheet, Capco is well-positioned to support the current capital requirements of both of its prime assets. Against this backdrop, the Board believes the time is right to consider the structure of the business in order to realise the potential of these unique assets and enhance shareholder value.”

As a consequence of the board’s decision to consider a demerger, Ian Durant has informed the board that, whilst he is fully supportive of the Board’s decision to consider a demerger, in light of his eight-year tenure as Chairman and external commitments, he believes it would be appropriate to put in place his successor to lead the board through this process. Ian has therefore notified the board of his intention to resign as Chairman.

In line with industry best practice and as part of Capco’s normal succession planning, the Nomination Committee has periodically assessed potential candidates, both internal and external, who might succeed Ian Durant.

Accordingly, the board has decided to appoint Henry Staunton, the current Senior Independent Director, as Chairman with effect from the 5th of June 2018 and the board looks forward to Henry chairing the company through the possible demerger process, working closely with the management team.

Henry, who joined the Board of Capco in 2010, is currently Chairman of the Audit Committee and Senior Independent Director. He has extensive financial and commercial experience being a former Finance Director of Granada and ITV, and is currently Chairman of WH Smith PLC and Phoenix Group Holdings Limited, from which he is expected to retire in August 2018.

As a result of Henry’s appointment, Gerry Murphy will become Chairman of the Audit Committee and Senior Independent Director, and Charlotte Boyle will become Chair of the Remuneration Committee and a member of the Audit Committee. Henry will chair the Nomination Committee.

Ian Durant commented: “After eight years as Chairman, I leave the company in a strong position, with two of the best central London estates, a strong balance sheet and an experienced and professional management team. I believe now is the right time for the Board to consider the separation of our two high quality businesses, and consider it appropriate that this initiative is chaired by someone able to commit time to its preparation and continue with part of the business after implementation. Henry, who has considerable Board experience and a deep knowledge of Capco is the natural successor to lead Capco through its next stage of growth. I am grateful for the support and hard work of my colleagues during my time as Chairman.”

Henry Staunton commented: “On behalf of the Board I would like to thank Ian for his stewardship over the past eight years. Capco has benefited from his judgement and experience and he leaves the Company in a strong position. I am delighted to be appointed as Chairman and look forward to working with the Board and the management team on the next phase of our growth.”