The proposed takeover by French mall operator Klépierre of Dutch peer Corio has met with generally positive comment from analysts.
The proposed takeover by French mall operator Klépierre of Dutch peer Corio has met with generally positive comment from analysts.
Under the terms of the transaction announced on Tuesday, Klepierre will take over 100% of Corio’s ordinary shares in a deal valuing the company at €7.2 bn - including debt - and representing a 15.6% premium on Corio's closing price of €35.8 on 28 July 2014.
'The premium looks generous given the under-performance of Corio’s portfolio since 2012,' commented Kai Klose, an analyst with private bank Berenberg in London. He added: 'We agree with the rationale for the deal, which is to increase the size of the pan-European shopping centre portfolio. Larger retailers in particular prefer to structure their expansion plans with preferred partners and expand into several areas.'
'The deal was always goings to happen,' JPMorgan Chase & Co. analysts wrote in a note to clients. 'Corio has been a perennial takeover target.' Another investor is unlikely to bid for the company, JPMorgan wrote in a separate note.
Klépierre’s CEO Laurent Morel said during a conference call on Tuesday that the conditional agreement does not rule out the possibility of a counter bid. Both companies may terminate the merger protocol if a third party makes an offer which exceeds the exchange ratio by 3% (if fully in cash) and 6% (if fully in stock). In the event of a competing offer, Klépierre will however be given the opportunity to match such an offer.
If it goes ahead, the proposed merger will create the second-largest listed retail company in Europe with gross assets of over €21 bn. Market leader Unibail-Rodamco has €26.8 bn of shopping centre assets.
On Wednesday, Dutch financial newspaper Het Financieele Dagblad reported analysts as saying that Corio's restructuring programme launched in early 2013 will likely be accelerated under Klepierre's ownership, noting that the new French parent will scruitnise each property to see whether it should be sold, upgraded or expanded. Klepierre itself has streamlined its portfolio significantly following the entry of Simon Property Group as a major shareholder in 2012.
Corio has already sold nearly €640 mln of non-core assets to a variety of buyers since the start of 2013 to concentrate on owning and operating larger shopping centres - dubbed Favourite Meeting Places - which are dominant in their catchment area. The firm had just over €7 bn of assets under management at end-2013.
Meanwhile, analysts at ING have raised their share price target for Corio to €40 from €39.20 in a vote of confidence that Klepierre's bid for Corio will succeed. Corio shares closed at €39.52 on 29 July. The biggest risk now for Corio shareholders, they said, is Klépierre's share price since the takeover is being carried out entirely through shares in the French REIT.
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