Grainger confirms Sovereign approach

29th Mar 2010 16:54

Residential property investor Grainger has confirmed that it has made a preliminary approach to AIM-quoted Sovereign Reversions which could be worth 185p a share. That is a 51% premium to Sovereign's closing price on 26 March. It would value Sovereign at £31.7m, while its net debt was £25.3m at the end of September 2009. The net asset value was 220.4p a share and embedded value was 445.5p a share. In February, fully listed-Grainger said that the residential market had improved over the previous few months. Grainger already has a home reversions business like Sovereign's. Grainger's subsidiary Bridgewater was named Best Home Reversion Provider for the fourth year in succession at the Equity Release awards in December 2009. Grainger had headroom of £315m from its bank facilities. Net debt was £1.28bn at the end of January 2010, following the £237m raised from a two-for-on rights issue at 90p a share in December. Buying Sovereign will not make a big dent in the available facilities.