Empiric retracts statement regarding Unite deal

UK: Empiric Student Company has released a statement following the announcement of a non-binding buyout proposal from Unite Group, specifically concerning achievable cost synergies and anticipated scrutiny from the Competition and Markets Authority (SMA). 

Empiric originally received a cash-and-shares bid from Unite, estimated to be worth around £719 million. 

Empiric claims that at 11.30 am on 5 June, senior representatives of Empiric, investors and an investment analyst attended a scheduled meeting, but that meeting was not attended by an appropriate financial advisor or corporate broker for the company, a breach of Rule 20.2(b) of the Takeover Code. 

After the board meeting, Empiric was forced to issue a statement over comments that “should not have been made.”

The statement read: “Shareholders are advised to disregard the statements entirely. In respect of the synergies statement, the company acknowledges that it was neither properly complied nor prepared with due care and consideration, such that the synergies statement is not capable of being supported by reports from its reporting accounts or financial advisers in accordance with the requirements of Rule 28.1(a) of the Takeover Code. In respect of the CMA Statement, the company clarifies that at this stage, there has been no engagement with the CMA by Empiric and no substantive competition analysis undertaken by its advisers. The CMA Statement did not therefore meet the standards of care required under Rule 19.1 of the Code.” 

After the meeting, the investment analyst published a report with the following statement: “On synergies [Empiric] said that half of Empiric’s £15m of overheads could be easily cut, possibly two-thirds, plus some financial synergies that could come from being a larger size entity (the “Synergies Statement”); and, Empiric said that the CMA will probably look at six out of the 23 cities where it is present, and eventually some asset disposals might be required (the “CMA Statement”) (together, the “Statements”).” 

Unite currently owns around 68,000 student beds and posted turnover of nearly £400 million last year, with Empiric owning around 7,700 beds and a turnover of £84 million. 

Although a proposal has been submitted, no formal offer has been made and the terms of the proposal are subject to change. 

Highlights: 

• Empiric Student Property has retracted statements made regarding a potential buyout by Unite Group.
• Empiric stated that the now-disregarded comments on cutting overheads by “half” or “two-thirds” and the CMA’s likely review of “six out of 23 cities” were not properly compiled or prepared with due care. 
• No formal CMA engagement of substantive competition analysis has occurred.
• The statements were made during a scheduled meeting with investors and an investment analyst, but not an appropriate financial advisor or corporate broker for Empiric. 
• Despite Empiric’s internal retractions, the non-binding cash-and-shares bid from Unite is still under consideration.