Soros fund demands rethink on KWE deal
Legendary investor George Soros has criticised plans by property group Kennedy Wilson Europe (KWE) to merge with its US sister firm in a deal that includes about €1bn of Irish assets such as hotel and shopping centres.
One of Mr Soros' investment vehicles, Quantum Partners, said it's "disappointed" at the proposed terms of the merger, which would create a $4bn (€3.7bn) global property investment giant.
The US arm, Kennedy Wilson Inc, has valued its European partner at £1.5bn (€1.7bn), representing a 20pc premium to Kennedy Wilson Europe's share price the final trading day before the deal was announced last week. The transaction has been recommended by the Kennedy Wilson Europe board to shareholders.
The combined group will have about 400 properties around the world. Of Kennedy Wilson Europe's £2.88bn in portfolio assets, 31pc are held in Ireland, and most of those in Dublin, with majority of the remainder in the UK. It also has some assets in Spain and Italy. Its assets include the Portmarnock Hotel and Golf Links and the Stillorgan Shopping Centre in Dublin.
The deal has already come under close scrutiny from investors and the intervention by Mr Soros's fund will heap further pressure on the deal.
Shares in Kennedy Wilson Europe, which is listed in London, edged just 0.6pc higher yesterday. Shares in Kennedy Wilson Inc were virtually unchanged in New York by mind-afternoon there. Quantum Partners is one of KWE's biggest shareholders, with a 12.6pc stake. Kennedy Wilson Inc is the biggest shareholder in KWE, with 23.6pc, and plans to buy the remainder.
KWE was "priced for distress along with other UK domestic stocks" following last June's Brexit vote, despite about 44pc if its assets being held outside the UK, said Merrion Capital analyst Darren McKinley has week. He has predicted that Kennedy Wilson Inc might eventually may a slightly higher price than that already pitched.
Quantum Partners' chief investment officer of Soros Fund Management, Dawn Fitzpatrick, wrote to the KWE board yesterday.
"As you know, our firm has been a strong advocate of Kennedy Wilson Europe Real Estate since inception," she wrote. She added that having reviewed the all-share merger proposal, the Quatum Partners is "disappointed with the terms of the transaction as well as our understanding of the process leading to the agreement".
"We agree that there is meaningful value that should be extracted from KWE and would welcome a sale if priced and structured appropriately," she said in the letter.
Ms Fitzpatrick added: "We urge the board of directors to honour their fiduciary duties and conduct a strategic review of all alternatives available to KWE, including a cash sale to unaffiliated third parties and an orderly liquidation of the company over time.
"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."
Ms Fitzpatrick was hired by Soros Fund Management from UBS earlier this year. A New York native, her grandparents emigrated to the US from Cork and Kilkenny.