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Johannesburg - Liberty International [JSE:LBT] has denied its demerger strategy is being pursued to make the UK property group more attractive to potential suitors, but analysts argue the move will be of little value otherwise.
The dual-listed group announced on Tuesday it will be splitting its portfolio into two separate businesses - a shopping centre-focused portfolio and a London-focused commercial property portfolio.
Since the announcement was made, the group's share price has dropped by over 4% on the JSE.
"It makes sense to separate," said Liberty CEO David Fischel. "In our view, investors like specialisation."
Asked if the company is demerging with the aim of looking more attractive to potential buyers, Fischel said: "Obviously not." However, Vestact CEO Paul Theron said Liberty's board has been under pressure for a while to be seen doing "something".
Said Theron: "But it's an uninspiring move."
According to Evan Jankelowitz, co-head of Stanlib's property franchise, splitting the portfolio serves no purpose other than making it more attractive for potential buyers.
The £6.1bn company is stressing focus and greater specialisation, said Jankelowitz. "My question is: why can't they focus on the existing company?"
According to Jankelowitz, a demerger could be a way to get more out of the company's stock, which has been fully priced for some time.
The group will be split into two new companies called Capital Shopping Centres Group, mainly consisting of the UK shopping centre business and Capital & Counties Plc.
Liberty International?s portfolio comprises properties like Covent Garden Estates, Earls Court and Central London office buildings.
Last month Finweek speculated that United States-based Simon Property Group and Australian-based Westfield Group could be potential bidders for a smaller, more focused shopping centre portfolio.
The group also reported an adjusted earnings per share drop of 37% to 18.3 pence for the year to end-December 2009. Including equity capital raised and other exceptional items, the diluted loss per share was 66.1p.
The company's rental income dropped by 3% as the UK property market started seeing a gradual uptick. "No one has seen a market like this in the UK," said Fischer.
The company reported an adjusted net asset value per share drop of 20% to 464p, while a dividend of 16.5p/share will be paid to investors.
- Fin24.com