Shaftesbury Stakeholder Threatens Legal Action Over Share Dilution

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The largest shareholder in West End property group Shaftesbury is threatening to sue the company over concerns that the company’s extensive fund-raising efforts are diluting his stake.

At the company’s annual general meeting, billionaire investor Samuel Tak Lee warned that he would pursue legal action against Shaftesbury unless the company addressed his concerns regarding the board’s £265m share placing activity in December 2017. Mr. Lee – who holds a 26.2% stake in the group – maintains that the capital raising was a deliberate attempt to dilute his shares and prevent him from a possible takeover bid in the future.

The Hong Kong property mogul has increased his stake in the group from 11% to 26.2% in the last three years, whilst a 30% holding would oblige him to make a bid for the company. A spokesperson for the commercial property investor stated that “unless Mr. Lee gets a satisfactory response” regarding his concerns about the 2017 fundraising activity, he would “be left with no choice but to litigate,” adding:

“Given the board’s unsatisfactory response to date, at present this appears unavoidable.”

A spokesperson for Shaftesbury however maintained that the group had already “fully addressed Mr Lee’s questions about the 2017 placing in extensive previous correspondence,” insisting that “the board acted entirely properly in undertaking the placing.”

Investor blocks property group’s bid to waive pre-emption rights

In addition to threatening legal action, Mr. Lee also successfully blocked three special resolutions from being passed at the company’s annual meeting. One of the blocked resolutions would have provided for more regular general meetings, whilst the other two would have allowed the board to waive shareholder’s pre-emption rights in some circumstances.

Shareholders’ right to pre-emption is particularly strongly protected under UK law, which allows shareholders the first right of refusal over new share issues in order to protect investors against having their holdings diluted by the new issues. In non-pre-emptive placings however, this first right of refusal is waived.

A spokesperson for the group said that the company was “disappointed that Mr Lee ha[d] voted against these resolutions and will continue to attempt to engage directly with him.”

Shaftesbury has engaged in significant share placing in recent years to raise capital for new acquisitions, instead of acquiring more debt to fund property purchases.

In 2017, Mr. Lee participated in the placing of £265m worth of shares and was granted 98.4% of the shares for which he applied. Both Lee and fellow investor Norges Bank Investment Manager have upped their stakes to 26% and 23% respectively recently, fuelling speculation of a potential race to take over the company and its vast London property assets. The property group’s 15-acre portfolio includes about 600 buildings across London’s West End, including locations in Chinatown, Carnaby Street, Soho and Fitzrovia.

West End tenants weather tough Christmas for High Street

The group’s annual meeting also heard directors note that retail tenants had seen “robust” Christmas footfall and turnover growth. The group reported “good leasing activity,” securing £9.3m in lease deals since October at values higher than 2017. Despite the ongoing crisis in the retail sector, occupancy of the group’s West End commercial sites “remain[ed] high.”

CEO Brian Bickell noted that “Footfall in [Shaftesbury’s] locations has been robust,” adding:

“In contrast to reports of subdued leisure spending nationally, our restaurants, cafes, pubs and bars were particularly busy throughout the festive period.”

Mr Bickell acknowledged that delays to Crossrail construction had been “disappointing,” with many London landlords waiting for the new rail connection to boost footfall.

However, the group added that this setback has not had “any noticeable impact on appetite for space in our locations".

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