5th Sep 2005 07:03
Land Securities Group Plc05 September 2005 5 September 2005 Land Securities Group PLC ("Land Securities" or the "Company") Proposed £300m disposal of investment in Telereal and agreements for ongoingoutsourcing role Land Securities announces that Land Securities Trillium Limited ("LS Trillium"),its property outsourcing business, has agreed, subject to shareholder approval,to dispose of its 50% share in Telereal to subsidiaries of its joint venturepartners, Pears Trusts Group and William Pears Family Holdings Limited,(together "Pears Group"), for a consideration of £300.0m. At the same time LSTrillium will enter into agreements maintaining its relationship with Telerealon an ongoing basis. Telereal was formed as a stand-alone business in 2001, when it purchased the BTproperty portfolio with LS Trillium and Pears making an initial equityinvestment of £146.0m each. Since its formation Telereal has provided strongreturns for the Company. These returns have arisen from the disposal of surplusproperty vacated by BT, rental income, the disposal of an investment portfolioand debt refinancing. For the year ended 31 March 2005, the Company's share ofTelereal's profit, which included net pre-tax profit of £29.9m arising from thesale of vacant property, was £63.4m on a pre-tax basis and £42.2m on a post-taxbasis. In the 2005 Annual Report, the Land Securities Board reported that it did notexpect the significant profits from Telereal to continue at the same levels asin previous years, since it anticipated a considerable reduction in profitspotentially available from the disposal of surplus property. As a result theBoard believes that the disposal now by LS Trillium of its interest in Telerealprovides Land Securities with an opportunity to crystallise a significantsurplus over the carrying value of the investment, approaching 80 pence pershare, while LS Trillium agreements with Telereal will provide a continuedincome stream lasting until at least 31 March 2010. The £300.0m consideration represents a £371.1 m surplus over Land Securities'carrying value of Telereal which was shown as a net liability of £71.1m in LandSecurities' balance sheet as at 31 March 2005, at which time the Company's 50%share of Telereal's gross assets was £1,065.9m and its share of Telereal'sliabilities was £1,137.0m. With the cash received on completion of the sale,the Company will continue to invest in its core markets of retail, Londonoffices and new property outsourcing contracts through LS Trillium, includingpotential investment in the multi-billion pound Ministry of Defence andgovernment-funded Building Schools for the Future programmes. LS Trillium agreements with Telereal The LS Trillium agreements with Telereal involve the management of part of BT'sleasehold estate and the provision of other services and enables LS Trillium tomaintain an ongoing relationship with Telereal. The agreement in relation tothe leasehold estate runs until the end of 2031 (although both LS Trillium andTelereal have the option to terminate the agreement at any time on or after 31March 2010 with not less than three months' notice). Under these new agreementsLS Trillium will receive annual revenues of approximately £50.0m which will leadto anticipated pre-tax profits of some £14.0m per annum. Income from thiscontract has only been included in the Company's business plan until 31 March2010. Future gain share The sale agreement provides for payments to be made by Pears Group to LSTrillium in the event that, within three years following completion, additionalvalue is realised in certain circumstances. LS Trillium will be entitled to50% of the excess gain above a value threshold of £750.0m in the event of adisposal or listing and 50% of the benefit of any new debt raised in excess of£500.0m. Commenting on the disposal, Ian Ellis, Chief Executive of LS Trillium, said: "Over the past four years we have worked with BT on the delivery of its propertystrategy. During this time we have considerably reduced the surplus propertyestate and realised profit shares for BT and excellent returns for the jointventure partners. This deal enables us to benefit from an ongoing income streamfrom Telereal while realising the value of our shareholding and thereby enablingus to demonstrate the value inherent in LS Trillium as the UK's market leadingproperty outsourcing business. We continue to see great opportunities in theoutsourcing market and will continue to invest in new contracts for LS Trillium,building upon our position of strength." Commenting on the transaction, Graham Edwards, Chief Executive designate ofTelereal, said: "Telereal is a strong service-orientated business. We have nowestablished a long term ownership structure which allows us to build on oursuccess to date. It has been a great pleasure working with Land Securities overthe past five years. We now look forward to further strengthening our propertypartnership with BT, and to using the skills and abilities of our team to thefull." Adam Dakin, Chief Operating Officer of Telereal, added "For us it is business asusual. We have a strong team of 350 people who are committed to providing anexcellent service to BT and our other major client O2. Following this dealnothing changes, our people stay the same, our clients stay the same and ourcommitment to service excellence stays the same." Extraordinary General Meeting and notice LS Trillium is a wholly-owned subsidiary of the Company and also Pears Group'sjoint venture partner in Telereal. As a result Pears Group is a related partyof the Company under the Listing Rules, and therefore this disposal to PearsGroup is subject to approval by the Company's shareholders. A circularconvening an extraordinary general meeting will be sent to shareholders shortly. Equity analyst and investor conference call Land Securities is holding a conference call for equity analysts and investorsat 10.00 a.m. today. The call is to be hosted by: Francis Salway, Group Chief Executive, Land SecuritiesIan Ellis, Chief Executive of LS Trillium. A live audio webcast of the conference call will be available on the company'swebsite (www.landsecurities.com). An archive copy will then be available at thesame address later today. - ends - Enquiries Land Securities Financial DynamicsFrancis Salway Stephanie HighettEmma Denne 020 7269 7160020 7024 5460 Land Securities Trillium TelerealIan Ellis Adam Dakin020 7796 5500 020 7710 4208 Telereal/Pears GroupGraham Edwards020 7433 3333 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Land Securities