Peel hits back at Harworth’s £973m valuation claim

Peel has hit back at Harworth Group’s rejection of its £583m takeover bid, dismissing the Yorkshire property group’s growth projections as “unsubstantiated and unconvincing” and warning that its financial performance continues to deteriorate.

The counterattack comes after Harworth claimed Peel’s 172.5p-a-share cash offer significantly undervalues the business, putting a potential value of 297.4p per share on the group – 72% above the bid and implying a value of around £973m.

Peel’s BidCo said it would carefully review Harworth’s formal response and issue its detailed views in due course, but set out a series of initial observations challenging the board’s valuation case.

It pointed to a 4.3% fall in Harworth’s EPRA net disposal value per share to 214.8p in the six months to 30 June, while statutory NAV per share fell 4.2% to 206.5p.

Peel also highlighted a negative 1.4% total accounting return over the last 18 months, arguing this continued a trend of “low and declining returns”.

It said Harworth’s new target of achieving “low double-digit TAR in the longer-term” was “unsubstantiated and unconvincing”, while questioning the deliverability of its previously extended target to reach £1bn of EPRA net disposal value by 2028-29.

The bid vehicle also attacked the group’s cashflow profile, pointing to a 6% fall in headline rental income, a 4.9% increase in administrative costs and a 47.6% increase in net finance costs in the first half compared with the same period last year.

The latest salvo comes as Harworth reported a challenging first half, with residential market headwinds pushing the group to a 3.7% negative total accounting return for the six months to 30 June.

EPRA net disposal value fell to £697.7m, from £725m a year earlier, while statutory net assets declined 4% to £670.8m.

Harworth said the fall in value was principally driven by weaker demand and increased costs in the housebuilder end markets.

However, industrial and logistics valuations remained broadly stable, with management actions to drive value across the pipeline, including on data centre sites, largely offsetting macroeconomic-driven increases in labour and materials costs.

Harworth’s board has remained “unanimous and unequivocal” in rejecting Peel’s offer, arguing that it is seeking to exploit the gap between the company’s depressed share price and the underlying value of its assets.

Chief executive Lynda Shillaw said the group had made “good operational and strategic progress” during the first half and into the second, despite the challenging backdrop.

She said Harworth had successfully repositioned its land and development portfolio since 2021, with 71% now weighted towards industrial and logistics, while developing a significant powered land bank.

“Our 34.8m sq ft land and development pipeline, which includes 0.8GW of powered land, would be difficult to replicate today given its scale, together with the advanced planning and power supply status, and strategic locations, of many of its sites,” she said.

Shillaw pointed to strong occupier demand across Harworth’s industrial and logistics portfolio, including the first pre-let at its 1.1m sq ft Chatterley Park site in Staffordshire to an advanced manufacturing occupier.

The group now has its largest-ever substantially construction-ready land bank, totalling 3.8m sq ft, which it says gives it the opportunity to capture demand through pre-lets, land sales and small to mid-box speculative development.

Harworth is also accelerating a fundamental change in the shape of the business.

It plans to become a pure-play powered land and industrial and logistics specialist, exiting the residential sector while refocusing on strategic land, enabling works and selective development.

But Peel has challenged that strategy, arguing that a complete exit from residential, in a challenging market and with the segment valued at £234m, is unlikely to optimise returns for Harworth shareholders.

Data centres are another major point of disagreement.

Harworth has 0.8GW of accepted power offers and has identified a further four hyperscale data centre opportunities across its land bank.

In its response to the bid, it puts the potential incremental value of its data centre pipeline at around £121m, equivalent to 37.3p per share, after allowing for timing and discounting future receipts.

It has also identified a further £131m, or 40.2p per share, of potential post-tax value from its industrial and logistics development pipeline.

Together with its £697.7m EPRA net disposal value, Harworth says those opportunities support a total estimated value of £965.6m, or 297.4p per share.

But Peel said Harworth had provided “no meaningful detail” on its data centre strategy.

It argued that the powered land portfolio did not yet have full planning consent and pointed out that, despite Site 2 being under exclusivity for a potential conditional sale, any cash receipts could be as late as 2033.

Harworth argues that its embedded value is not reflected in the independent property valuations underpinning its EPRA net disposal value.

It also points to £174m of potential net realisable value assessed by JLL for its near to medium-term industrial and logistics development pipeline.

A further 5.1p per share of potential value comes from recurring income from power purchase agreements.

Harworth has also accused Peel of making a “highly opportunistic” approach, timed to take advantage of the gap between its share price and underlying asset value.

It said Peel would benefit from the value upside generated by investments Harworth has made in its data centre and industrial and logistics pipelines, as well as the initiatives announced alongside its results.

Harworth also estimates that Peel would benefit from £30.7m of Stamp Duty Land Tax savings, equivalent to 9.5p per share, through acquiring the group via a takeover rather than direct property transactions.

The board said Peel was offering no demonstrable value for those savings or potential cost synergies to Harworth shareholders.

Peel maintains that its 172.5p cash offer addresses the “structural valuation discount” Harworth has faced for many years and provides shareholders with full liquidity and certainty of value in cash.

The offer values Harworth at approximately £582.88m and represents a 20.1% premium to its closing share price of 143.6p on 5 August, before the offer period began.

It represents premiums of 36.9% and 36% to the one-month and three-month volume-weighted average share prices respectively.

Despite the weaker first-half performance, Harworth said it retained a robust financial position.

Liquidity stood at £99.5m at 30 June, compared with £59.8m a year earlier, while net loan-to-value was 20.3%, falling to 17.1% at 31 August.

The group increased its interim dividend by 10% to 0.592p per share.

The board has advised shareholders not to accept Peel’s offer and urged those who have already accepted, and remain entitled to do so, to withdraw their acceptances.

The offer remains open for acceptance until 1pm on 25 October 2026, unless extended.