Great Portland Estates (GPE) confirmed this morning that it had entered preliminary talks with its FTSE 250 rival London Merchant Securities about a merger
The merger would create a £2bn property company focused on the west London office market. It would enable the combined company to convert to a REIT next year.
By themselves, Great Portland and London Merchant would both struggle to convert, it is understood, because Great Portland has too high an exposure to development, while London Merchant, which is controlled by the family of chief executive Robbie Rayne, would likely breach the shareholding rule, which says that no single investor can own more than 10% of a REIT’s shares.
It is likely that Toby Courtauld, Great Portland's young chief executive, would run the combined company.
Shares in Great Portland slipped 3.6% to 589.5p this morning in response to the news, valuing the company at £958m. LMS is valued at £890m.