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Civitas backs take-private offer that 'undervalues company'

The social housing landlord's board has agreed to a cash offer from a Hong Kong investor despite it being a discount to NAV
May 9, 2023

Social housing landlord Civitas (CSH) has backed a £485mn take-private offer from Hong Kong-based investor CK Asset Holdings (CKA). The 80p per share cash offer represents a 44.4 per cent premium to Civitas’ closing share price on 5 May – with shares jumping this morning to match the value of the offer.

Civitas’ board has recommended shareholders accept the deal, saying it would allow them to “exit in full and in cash”, though it added that the 80p per share on the table comes in at a 26.7 per cent discount to Civitas’ net asset value (NAV).

“While the Civitas board believes that the offer undervalues the long-term prospects of Civitas as expressed by NAV, we also recognise that Civitas, and its sector as a whole, faces a number of challenges in sentiment which the public markets are unlikely to overcome in the short to medium term,” the company said.

Civitas Investment Management (CIM), already asset-manages a portfolio of homes on CKA’s behalf which in 2021 was valued at £351mn. Civitas said in the offer announcement that CKA is an "indirect shareholder" of CIM, but did not outline the extent of the previous connection.

Civitas and its peer Triple Point Social Housing (SOHO) – whose share price leapt 17 per cent following news of the offer – have long come under fire from regulators, politicians, homeless charities, and investors alike for its long leases to overleveraged and poorly run social housing operators.

Last month, Auckland Home Solutions, which accounts for 15.9 per cent Civitas’ rent roll and 4.6 per cent of Triple Point’s rent roll, was hit with an enforcement notice from the Regulator for Social Housing (RSH) for failing to comply with its standards. This came after My Space Housing Solutions, another tenant of both landlords, was hit was an RSH enforcement notice in January.

James Carthew, an investor in Civitas and head of investment companies at QuotedData, has called on shareholders to reject CKA’s offer, arguing that those who “stuck by the company over the past few years deserve better than this”.

In addition to announcing the offer, Civitas confirmed that shareholders who are on the register as of the close of business on 19 May will also be entitled to receive and retain this calendar year’s first quarter dividend of 1.425p per share.