Canadian pension fund strengthens ties with Nordic retail specialist

Nordic listed retail specialist Citycon plans to carry out a directed share issue of €206.4 mln which will be fully underwritten by Canadian pension fund CPP Investment Board.

Under the agreement, CPPIB will become a strategic shareholder in the Nordic retail specialist with a 15% stake after the direct share issue. The two companies have already partnered in Stockholm where in September 2013 they finalised the sale of the €534 mln Kista Galleria.

The share issue, which is part of a strategy to strengthen Citycon's balance sheet, will see the Finnish firm raise a total of €400 mln of new capital, including €206 mln subscribed by CPPIB and a subsequent €196.5 mln rights issue. If the rights issue is subscribed in full, CPPIB will eventually own 12.5% of Citycon.

The placing will be carried out at a price of €2.65 a share, representing a 2.2% discount to the closing share price on May 2014.

The transaction is conditional on approval at an extraordinary general meeting. The company’s two largest shareholders, Gazit-Globe and Ilmarinen Mutual Pension Insurance Company, which together represent a majority of the company's share capital have, however, committed to supporting the deal.

Citycon plans to use the proceeds to make an approximately €300 mln debt repayment which will give it the freedom to recycle capital accretively by pursuing select acquisitions and (re)development projects of supermarket-anchored shopping centres in dense urban locations in the Nordic and Baltic regions.

Goldman Sachs International is acting as the company’s financial advisor in connection with the strategic investment by CPPIBEH and Roschier Attorneys as its legal advisor in connection with the transaction. Pohjola Bank has committed to act as the lead manager of the proposed rights Issue. J.P. Morgan is acting as CPPIBEH’s financial advisor and Hannes Snellman Attorneys as its legal advisor.