NewRiver REIT has reached an agreement with Capital & Regional to acquire the firm for £147m.

The combination deal represents a 21% premium on Capital & Regional’s closing price, with shareholders set to hold around 21% of the combined entity.

As part of the acquisition, Capital & Regional shareholders will receive 31.25 pence in cash and almost 0.42 NewRiver shares for each of their existing shares.

NewRiver said the combination of the firms will create a retail portfolio valued at £889m, and allow for the merger of "high-quality, complementary assets", which include six community shopping centres located in London and south east England which are owned by Capital & Regional.

Chair at NewRiver REIT, Lynn Fordham, said: "This is a compelling transaction which has a strong strategic, operational and financial rationale at an attractive point in the market cycle. Combining the complementary retail portfolios of NewRiver and Capital & Regional will create an enlarged specialist REIT with a c. £900m portfolio of high quality, well-located assets, including 29 community shopping centres and 13 retail parks across the UK and Northern Ireland.

"Both portfolios share a focus on convenience, value and essential goods and services, and are well positioned to benefit from future rental growth, supported by NewRiver's retail asset management platform.

NewRiver added that the transaction is set to offer "substantial cost savings and significant earnings accretion", alongside its existing £2.4bn capital partnerships business, which is set to enhance the group’s ability to pay a "materially higher dividend".

Chair of Capital & Regional, David Hunter, added: "The combination of these two complementary portfolios provides our shareholders with both upfront liquidity through the cash element and equity exposure to an enlarged UK REIT, offering increased share liquidity from a broader shareholder base.

"Capital & Regional shareholders will also benefit from exposure to a business a strong balance sheet and a combined track record of sustained dividend growth, providing an excellent opportunity to deliver ongoing value for shareholders.

"When weighing the standalone prospects of Capital & Regional against the combination, and in light of Growthpoint's intentions regarding its majority stake, we believe this offer is in the best interests of Capital & Regional shareholders and are pleased to unanimously recommend it to them."

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