Grainger makes £34.6m bid

David Hellier
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RESIDENTIAL landlord Grainger has made a conditional 202p per share offer to buy Sovereign Reversions to consolidate its position in the lucrative home equity release market.

The offer values Sovereign at £34.6m. The boards of both companies announced earlier this week they had reached agreement in principle on the terms of the recommended cash offer subject to completion of pre-takeover due diligence.

Shares in the company, which have risen by 82 per cent in the last 12 months, closed 2.7 per cent higher at 190p after the announcement.

The possible offer, which has the backing of shareholders owning 31 per cent of Sovereign’s stock, may be implemented by way of an offer to all shareholders or by a scheme of arrangement.

The board of Aim-listed Sovereign, chaired by former Merrill Lynch star banker Bob Wigley, has voted unanimously to recommend Grainger’s offer to its shareholders and has agreed to pay an inducement fee of £300,000 if Grainger commits to its offer and the board reneges on this agreement, perhaps by encouraging a counter offer.

Sovereign is being advised by Charles Stanley and Fairfax. JPMorgan Cazenove is advising Grainger. Sovereign specialises in providing plans to senior citizens who wish to unlock equity tied up in their homes after retirement.

SOVEREIGN Reversions may not be the most glamorous of companies but late last year it attracted one of the City’s best connected investment bankers to become chairman of its board.

Bob Wigley was until January of last year chairman of Merrill Lynch Europe, Middle East and Africa. During his time at Merrill Lynch, he also sat on the boards of LCH.Clearnet, Euroclear and on the EU Advisory Panel of the London Corporation. Between 2006 and 2009, he was a member of the Court of the Bank of England and of its Risk Policy and Audit Committees. He is currently the non-executive chairman of Yell Group.

The Grainger offer represents a 37 per cent premium to the price on the day Wigley took over at Sovereign Reversions. In recent times he has been a behind the scenes adviser to George Osborne on financial matters in the run-up to the election and he was also a public signatory to the Conservative-backed letter by businessmen that criticised the government’s national insurance tax rise.