News on 6 November 2000
Just three years after it was formed, property outsourcing
company Trillium is to be sold
to the UK's largest property company Land Securities for £160m in
cash and 680,000 shares, worth £5m.
Land Securities will also take on around £165m of Trillium's debt,
pushing the total cost of the deal, which has to go through due diligence,
to £330m.
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| Ian Henderson (front) with Manish Chande |
Trillium was formed to bid for the DSS
PRIME property outsourcing contract, which it won and has been working
with Land Securities for the past nine months in joint venture bids for
the BBC and London Underground Property Partnership (LUPP) PFI contracts.
Their joint ventures have been successfully short-listed for both projects
- a decision is expected on LUPP around the year-end and on the BBC early
in 2001. Trillium intends to submit its final proposal for the London
Underground Property Partnership on 17 November 2000.
Trillium is owned by its management, principally Manish
Chande and Martin Myers and the Whitehall Street Funds (a vehicle
for property investment by the directors of Goldman Sachs). Chande, co-founder
and Chief Executive of Trillium, will join Land Securities main board
and will be responsible for developing its 'total property services business'.
Myers, co-founder of Trillium, becomes a Special Advisor.
The two founders are reported to be in line to share £15m in cash
and shares whilst Trillium's 600 staff could receive over £10,000
each. It is believed that the directors of Goldman Sachs will get £136m
in cash.
Land Securities says the acquisition is consistent with the company's
strategy of seeking to diversify into growth areas of the property market
to increase earnings and improve returns on equity. The DSS properties
will not go into Land Securities investment portfolio and the company
is adamant that this is not a property deal but complements its development
and asset management business. It expects Trillium to contribute to earnings
within the first full year following the acquisition, which should be
completed by the beginning of next month.
Commenting on the deal, Ian Henderson, Chief Executive of Land Securities,
said:
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| Ian Henderson |
"The acquisition of Trillium continues the progress
made to date of restructuring our business to take advantage of the new
opportunities in today’s property industry. Our core business skills
have already been enhanced through the appointments of Peter Walicknowski,
Francis Salway and John Anderson, and Trillium brings us exposure to the
corporate and government property outsourcing market, a growth area where
we see significant opportunities. It also provides us with the skills
to enhance our own tenant offering.
"We welcome the Trillium team, who I believe will provide a new dimension
to Land Securities, and this continues our strategy of growing earnings
and improving our returns."
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| Manish Chande |
Manish Chande, Trillium’s Chief Executive commented:
"The sale is a great testament to how far Trillium has come in less
than three years and also the potential in the property outsourcing market.
This year we have partnered with Land Securities very successfully on
the BBC and London Underground outsourcing contracts, reaching the last
two shortlisted bidders in both. Land Securities will provide a very sound
platform for future bids.
"I am delighted that such a prestigious and established organisation
has chosen to acquire Trillium."
Reaction and comment
Analysts and property writers have been united in their view that the
deal is an imaginative one for Land Securities but divided on whether
it marks a real change of direction.
The Daily Telegraph said: " With chief executive Ian Henderson
at the helm, however, the company is looking to move into a more lucrative
part of the property market - with shorter, more flexible leases and more
facilities management."
According to The Independent: "The FTSE 100 property group which
has been regarded as a lumbering giant, pulled off the potentially transforming
acquisition of Trillium, the company that pioneered the services model
for property."
The paper quotes analyst Adrian Elwood of Teather & Greenwood: "This
is transforming for Land Securities, which has been struggling to keep
up with trends in the industry. It puts them potentially at the cutting-edge
of one of the main future developments in the sector. It's a brilliant
strategic move."
Anthony Hilton, writing in the London Evening Standard is not so sure:
"At first sight this seems rather a lot to pay, but basically the
consideration is the discounted value of the Prime contract. However,
remembering earlier rows when recently-privatised assets have been resold
at fancy prices to yield huge profits to the initial buyers, this deal
may cause a gnashing of teeth at Westminster.
"Land Secs is surely right to do this deal but, to be realistic,
it is a vast company and Trillium is barely a pimple on its surface. So
the property giant has not been transformed overnight by this acquisition,
but it is a step in the right direction."
Does this acquisition mean that once again the interests of property development
(and the need for a quick return on investments) have cut short the development
of a genuinely far-sighted and service oriented company? Or does it mark
the realisation by a major player in UK property that the industry must
change. It's far too early to say but we're likely to see more deals like
this before long.
www.trilliumgrp.com
www.landsecurities.co.uk
