Colonial confirms preliminary merger talks with Gecina

Spanish property company Inmobiliaria Colonial has confirmed media reports it is in merger talks with French property group Gecina, which is working through a divorce from another major Spanish property company Metrovacesa.

Colonial said in a statement that 'no agreement has been reached yet on the possible merger between the two groups', but admitted that there have been preliminary talks between the company representatives. The merger would create one of the leading property companies in Europe, with assets of more than EUR 24 bn. About 70% of the assets would be located in France.

In an article published on Friday, Spanish newspaper Cinco Dias said that a merger would assist Gecina's chairman Joaquin Rivero to reduce his stake in Gecina and help Colonial cut its debt of EUR 8.9 bn.

Earlier this month, French bourse AMF ruled that Rivero and another Gecina shareholder, Bautista Soler, acted in concert in a share buyback plan which was part of the project to separate Gecina from Metrovacesa. Through a merger between Gecina and Colonial, Rivero and Soler would reduce their Gecina stakes to comply with AMF regulations. According to the French bourse the two Spanish shareholders must either launch a formal takeover bid or reduce their combined 42% stake in the French company.

On the other hand the move would help Inmobiliaria Colonial to cut its debt/asset ratio from the current 70% to some 50% to 55%. In an effort to reduce its debt Colonial also decided to carry out a series of disposals and announced its intention to sell part of its 84% stake in the French subsidiary Société Foncière Lyonnaise (SFL).

This month Colonial completed its merger with Riofisa, a Spanish group focusing on retail, while earlier this year Colonial merged with Inmocaral, creating the largest property company in Spain with EUR 13.6 bn of assets.

To read our story on Colonial's disposals, click here