Kennedy Wilson Europe takeover plan ‘disappoints’ Soros fund

Hedge fund guru George Soros's Quantum Partners fund has written to the board of Kennedy Wilson Europe (KWE) to say he is "disappointed" with the property group's planned takeover by the US company that set it up and floated it in 2014.

California-based Kennedy Wilson Holdings (KW) said early last week that it has agreed to buy the 76 per cent of London-listed KWE that it does not already own.

Quantum Partners, which owns about 12 per cent of KWE, said: “We are disappointed with the terms of the transaction as well as our understanding of the process leading to the agreement.

“We urge the board of directors to honour their fiduciary duties and conduct a strategic of all alternatives available to KWE, including a cash sale to unaffiliated third parties and an orderly liquidation of the company over time.”

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The open letter, published on Tuesday, comes three days after The Irish Times reported that shareholders in the other party to the transaction – New York-listed KW – had been selling shares in the belief that the all-stock deal was priced in a way that meant they were giving away too much value to KWE.

Shares in KW fell by as much as 11 per cent last week, wiping almost $275 million (€251.8m) off the face of the company.

Analysts and shareholders said that some KW investors were concerned that the deal was structured in a way that valued KWE at just a 3.5 per cent discount to net asset value – a key measure for property stocks – when the rest of the UK sector is trading at a discount of about 20 per cent amid fears over the outlook for UK property as a result of Brexit. Some 56 per cent of KWE’s assets are in the UK.

Investors

Meanwhile, some investors in KW believe the deal undervalues its stock. At the time of the announcement, KW’s shares were valued at $22.50 each, which analysts said was as much as a 33 per cent below the NAV estimate of some shareholders.

Shares in KWE also fell late last week as a drop in the KW stock reduced the value of the transaction.

Mr Soros’s Quantum Fund, which said it has been a “strong advocate” of KWE since its inception, said that a “more robust strategic review has the potential to attract additional value-enhancing offers and thus allow KWE shareholders to make a more informed decision as to the intrinsic value of their shares”.

The fund said it planned to engage in a “constructive” discussion with KWE directors in the coming days.