Austrian property firm Immofinanz has acquired a 26% stake in peer CA Immo in a move aimed at merging the two businesses and create a new property giant focused on commercial assets in Central and Eastern Europe.
Immofinanz said on Monday that it has agreed to buy over 25 million CA Immo shares for €604 mln from Russian-owned O1 Group at a price of €23.50 apiece, representing a premium of 35% to Friday's closing price.
In a second step towards the merger, Immofinanz said it will demerge or sell its Russian portfolio, consisting of five Moscow shopping centres with a book value of around €1.2 bn. The assets have a different 'portfolio dynamics and a higher risk profile', the companies said in a statement. They shed €400 mln in value in the third quarter of last year as the Russian economy suffered from low oil prices and international sanctions. Immofinanz has been forced to give discounts to tenants in Moscow hurt by the weak rouble, who have to pay their rents in dollars.
If successful, the merger would create a new heavyweight in CEE with an investment portfolio valued at around €9 bn and a project development pipeline of some €2 bn. The portfolio would consist of around 3.8 million m2 of space, largely consisting of offices, which are expected to represent around 75% of the combined portfolio.
Immofinanz said it would fund €200 mln of the stake purchase price in cash, €300 mln through the issuance of a convertible bond and €100 mln via a bridge loan.
‘Today’s announcement marks another very important step in the transformation of Immofinanz,’ said CEO Oliver Schumy. ‘With the acquisition of the stake in CA Immo and the decision to dispose our Russian portfolio we now have created the basis for this merger. The combined company will be a leading real estate company in Central and Eastern Europe. The portfolios of both companies are very complimentary and we expect significant synergies from the transaction.’
Frank Nickel, CEO of CA Immo added: ‘The strategic logic of a combination between CA Immo and Immofinanz is clear. Substantial synergies could be created from such a combination, which of course would be subject to shareholder approval.
Wolfgang Ruttenstorfer, Chairman of CA Immo added: ‘A merger of CA Immo with IMMOFINANZ is the logical evolution for our company. We believe it is now the right time for such a transaction.’
The transaction is subject to a 75% majority approval of the shareholders of both companies. The parties said that they expect the shareholder meetings to approve the statutory merger will take place in 2017.
Shares in CA gained nearly 12% to €19.50 following the announcement, its highest in nearly a decade.
The announcement comes about a year after an initial attempt to combine the two property companies failed amid bitter remarks between the companies' two CEOs, with both Immofinanz and CA Immo dropping plans to take over the rival firm.
In April last year Immofinanz, then led by Eduard Zehetner, announced plans to buy a 30% stake in CA Immo at a price of €18.50 a share, or a total investment of €530 mln.
Earlier that same month, Immofinanz had formally advised its shareholders to turn down a €422 mln bid by CA Immo and its Russian partner, 01 Group, for a 13.5% stake in its business.
