Peel ups Harworth bid to almost £600m as takeover battle escalates
Just days after the listed developer launched a defence of the proposed deal, Peel Pepper is now offering 177.5p a share in cash, valuing Harworth at approximately £599.8m.
The revised offer is a 2.9% increase on Peel’s original proposal of 172.5p a share, worth around £583m and represents a 40% premium to Harworth’s three-month average share price.
The move comes after Harworth published its defence document last week, setting out its arguments against the takeover and outlining a new strategy for the business. The Yorkshire-based developer has set out its ambitions to exit the residential market and focus on becoming a ‘pure play’ powered land I&L specialist. It has also outlined £7.4m in annual cost savings that it intends to implement.
Peel has now hit back, once again using its response to question Harworth’s financial position and the credibility of its future plans.
It said Harworth’s net asset value had fallen by 4.3% in six months, to 208.8p per share, while rising debt and falling sales volumes were putting further pressure on its finances.
Peel also warned that Harworth was becoming increasingly capital constrained, with less ability to invest in its development pipeline.
The takeover bidder has particularly targeted Harworth’s new strategy, and questioned plans to exit residential land at a time when the market remains challenging, arguing that this could mean selling land at discounts and putting further pressure on net asset value.
It also described Harworth’s new development targets as unrealistic, given its track record and available capital and it took aim at the company’s plans to focus on data centres, saying the strategy lacked detail and that potential cash flows could be 15 to 20 years away.
Peel also criticised Harworth for not setting out a clear short- to medium-term route to its existing £1bn net asset value target, instead introducing a longer-term target of a “low double-digit” total accounting return.
Peel said the revised offer provided shareholders with a certain cash exit, rather than leaving them exposed to what it sees as an increasingly uncertain outlook for Harworth.
The revised offer will be funded entirely from Peel’s existing cash resources, with no external financing required, and Peel said its plans for Harworth’s employees, management, pension schemes, and locations remain unchanged.
However, there is a significant consequence if the takeover succeeds: if Peel secures 75% of Harworth’s voting rights, it intends to seek the cancellation of the company’s listing on the London Stock Exchange.
If it reaches 90%, it intends to compulsorily acquire the remaining shares, subject to the relevant legal requirements.
The revised offer now puts the ball firmly back in Harworth’s court, as the increasingly hostile takeover battle continues.
A spokesperson for Peel said: “Harworth’s defence document highlights rather than addresses the issues faced by the company.
“It announced a further decline in NAV and cash flow, while remaining silent on the company’s short-to-medium term outlook.
“Instead, it flags a new strategy lacking credibility but promising ‘long term’ returns for shareholders. Peel’s revised offer provides shareholders with the certainty at completion of a highly attractive cash alternative at a fair price and 40% premium.”
