Morgan Stanley to lead Saville Gordon MBO

The investment bank’s fourth real estate fund is set to complete a £500m deal to acquire the UK property firm.

Morgan Stanley has reached agreement with Saville Gordon Estates, the UK-listed real estate group, to acquire the firm in a £500m transaction. The deal will be carried out using funds from the firm’s Morgan Stanley Real Estate Fund IV (MSREF IV) through a newly-created company, Chambercroft.

The offer, which has been approved by the Saville Gordon board, is the first to be carried out by MSREF in the UK. Roger Carey, chief executive of Saville, is leading Saville’s management in the deal.

Of the £500m transaction proceeds, £200m will be paid to shareholders while the remainder will be used to satisfy company debt of just under £300m. Morgan Stanley is also providing debt to Chambercroft as part of the acquisition.

The offer is the latest in a series of public-to-private deals for listed real estate firms in the UK, which in recent years have been seen to constantly trade below net asset value. The offer of 121.3p per share is 2 per cent above the firm’s net asset value but over 30 per cent above the firm’s share price on 4 April 2002, the last business day prior to the announcement of talks between the two groups.

Hawkpoint acted as financial adviser to Saville Gordon on the deal. KPMG worked on the due diligence for MSREF IV. Clifford Chance was legal adviser to MSREF IV, with Barlow Lyde & Gilbert working for the management team. Allen & Overy advised Saville Gordon.