Private equity outfits eyeing potential bid for Grainger, report says

The pressure on the management team at Grainger to increase its payout to shareholders is growing as private equity groups run the rule over the outfit in preparation for a possible bid.

According to The Sunday Times private equity outfits are studying both a possible full-scale takeover or piecemeal asset sales.

The report came amid recent strong trading for the £1bn residential property landlord which specialises in regulated tenancies, purchasing properties at a discount while allowing their owners to live in them their entire lives at sub-market rents.

On 13 August the firm, which is listed on London's second tier index, said that in the ten months ending on 31 July rental increases had averaged 6.0% on a like-for-like basis on new lets and 2.3% on renewals, compared with 4.2% and 3.2% in July 2014.

The company, which is carrying nearly a £1bn in net debt on its balance sheet, recently refinanced its debts.

Together with its investments in market rented assets, financed from its reversionary assets, and a simplified structure, that would allow the outfit to be able to improve its profitability, and boost its payout, analysts at Numis said in a research report e-mailed to clients that same day.

"It would enable Grainger to improve distributions to shareholders, which in turn should help the share price close the discount to net asset value."

The Newcastle upon Tyne headquartered firm also disclosed it had named investment bank Lazard & Co in Frankfurt to advise on the disposal of its wholly-owned residential property assets in Germany, which it described as "non-core".

Grainger also accelerated its plans to renew its top ranks. Helen Gordon was now set to join the company as CEO designate by 1 December, earlier than previously stated.

In parallel, it was announced that Mark Greenwood would retire as finance director at the end of December 2015.

Year-to-date shares of Grainger were sporting a rise of 30% as of the close of trading on 14 August, versus a gain of 9.5% for the FTSE 250.