GLOBAL - Sovereign wealth fund the Investment Corporation of Dubai (ICD) is seeking approval from two major shareholders in Colonial for its €3.1bn offer for the Spanish property firm.
The purchase price represents a 13.2% premium on the firm's market value, but should it be approved debt will be a key component in a deal which is dependent on what the ICD described as "a satisfactory business agreement" with lenders, including RBS, Eurohypo and Goldman Sachs.
Colonial's share price has fallen significantly over the past two quarters, reflecting a cooling market and the higher price of credit, as its current debt held is €8.5bn.
In a letter to shareholders, ICD chief investment officer J Thayer Jack said the fund would pay for the shareholding via a 50—50 split between cash, at €1.85 per share, and securities, at €2.25 per share at maturity. He also announced the fund's intention to acquire the company - which is now Spain's second-largest property firm by assets - once it had a majority stake.
With a strategy based on development for rental - which makes up 80% of its portfolio - Colonial also has assets worth €12bn focused on prime in Paris, Madrid and Barcelona, and a much smaller domestic residential portfolio. Its recently acquisition of Riofisa signified its intention to enter the pan-European shopping centre market.
The ICD deal will still be subject to regulatory approval if the shareholders agree to it. Yet the European Commission last week called for a common European position demanding sovereign wealth funds embrace more "transparency, predictability and accountability". Commission president José Manuel Barroso urged member states to adopt a "balanced and proportionate common EU approach, to protect legitimate policy interests without falling into the trap of protectionism".
The proposed approach will cover governance and the information SWFs provide on their size, investment objectives, strategies and resources. However, Barroso credited SWFs with injecting liquidity and helping to stabilise financial markets. "They are not a big bad wolf at the door," he said.
Colonial officials were unavailable for comment at the time of publication.