Buyout of retirement housebuilder by private equity firm approved despite significant vote against

Lone Star secured approval for its £647m takeover of retirement housebuilder McCarthy & Stone in a shareholder vote late yesterday.

The US private equity firm won the backing of shareholders controlling 85.7% of the shares at a court meeting to approve the deal, just above the 75% threshold needed to take the firm private.

Thatcham. McCarthy & Stone

The firm said just 75.4% of individual shareholders voted at the meeting in favour of the deal, which was significantly sweetened yesterday with a £17m last-minute increase in the offer price.

Some shareholders have been reluctant to accept the offer from Lone Star as while the final offer price of 120p per share was significantly in excess of the firm’s stock market value since the onset of the coronavirus pandemic, McCarthy & Stone traded consistently at around 150p per share prior to the covid crisis.

The deal also needed McCarthy & Stone shareholders to approve it at a company general meeting, which they did with a majority of 79.4% to 20.6%.

In a statement the firm said: “The requisite majority of scheme shareholders voted in favour of the scheme at the court meeting; and the requisite majority of McCarthy & Stone shareholders voted to pass the resolution in connection with the amendment of the articles and the implementation of the scheme at the general mMeeting.

The firm said the takeover by Lone Star is now expected to go through via a scheme sanction hearing at a court early next year. This will see the business de-listed from the stock exchange.

Announcing the proposed takeover in October, Donald Quintin, president of Lone Star Europe, described McCarthy & Stone as a leading developer and manager of retirement communities and said the deal “represents an attractive opportunity in a market underpinned by clear fundamentals: a rapidly ageing population and a structural undersupply of suitable housing options for older people”.

The “long stop” date by which the takeover must now go through is 28 February next year.

McCarthy & Stone has been hit harder by the pandemic than its mainstream housebuilder rivals, with the firm saying its older customer base had been far more cautious about re-entering the housing market since the initial spring lockdown was lifted. The firm said revenue for the calendar year will be down 79% at just £197m.

Cenkos analyst Kevin Cammack said shareholders have responded to an “ultimatum”. He added: “I think the decision being faced is less about whether one thinks 120p is a fair price to put on the group (debatable) but more about whether the retirement homes industry, with its unique trading characteristics, is a suitable one to be in the publicly quoted arena?”