(Reuters) — U.S. private equity firm Lone Star has agreed to buy British property firm Quintain Estates and Development (QED.L) for 700 million pounds ($1.1 billion) to gain one of London’s few remaining large-scale development opportunities.
The cash bid of 131 pence a share is about 22 percent above Quintain’s closing price on Tuesday and gives Lone Star access to a large area of undeveloped land around London’s Wembley Stadium.
Quintain’s shares rose as much as 23 percent to 131.75 pence, making it the top percentage gainer on the London Stock Exchange on Wednesday, and suggesting some investors hope for a counterbid.
“The proposed acquisition represents a unique opportunity for Lone Star to gain further exposure to residential and commercial assets in London,” said Angus Dodd of Lone Star Europe Acquisitions LLP.
Foreign buyers, particularly U.S. players, are making huge property purchases in Britain, betting residential as well as commercial property values will continue their steep rise.
Quintain, following a three year restructuring process, has been trying to get planning consent to ramp up its development for the 43 acres on the Eastern Lands at Wembley Park.
The risk of holding a large land asset without permissions to build has caused its shares to trade at a discount to its net asset value — the market value of its portfolio.
“Quintain’s residential development opportunity at Wembley Park is not without considerable cycle and execution risk. The offer provides immediate value realization to shareholders,” Liberum analysts said.
Quintain’s directors are to recommend the offer unanimously, it said.
Lone Star has been one of the most active players in the UK property market over the last 18 months.
Its large cash reserve is expected to help it accelerate development at Wembley Park.
House prices in red-hot London have surged in the last two years to record highs boosted in part by government measures to make it easier for people to get mortgages. Property experts forecast prices will continue to rise this year due to a chronic shortage of homes.
Britain’s government recently announced plans under which it will step in and draw up housing plans if local authorities fail to do so. This could boost prospects for various developers holding unused land.
Morgan Stanley is advising Lone Star. Quintain is being advised by J.P. Morgan Cazenove and Lazard.