Dubai sovereign fund resumes talks with Colonial's shareholders

Spanish property tycoon Luis Portillo and the Nozar group, the two main shareholders in Inmobiliaria Colonial, confirmed on Tuesday that the Investment Corporation of Dubai (ICD) has resumed talks with them about a potential bid for a controlling interest in the troubled Spanish property company.

Portillo and the Nozar group said in a regulatory filling to the stock market regulator late on Tuesday that they were in renewed discussions with the Dubai sovereign wealth fund. Earlier in the day it was announced that the two sides had failed to reach an agreement by the 3 March deadline despite the 'best efforts' of all parties.

Market regulator CNMV had suspended trading in Colonial shares in response to market rumours that ICD and Colonial's two main shareholders were still in talks. The CNMV asked each party to issue a statement to clarify the situation.

Meanwhile the debt-laden company fell to a two-year historical low in Madrid trading. Colonial's shares plunged 14% to EUR 1.06 per share on Tuesday. This compares to a high of EUR 4.5 per share the company shares were trading less than a year ago in June.

The Dubai fund said at end-February it would pay EUR 1.85 a share to gain control of at least 50.1% of Colonial, mixed with debt worth EUR 2.25 a share, before bidding for the whole company in accordance with Spanish takeover regulations. The EUR 3 bn offer represented an 8.8% premium on the Colonial share's closing price of EUR 1.70 the day before the bid.

The move, if successful, would have marked the Dubai sovereign fund's first major foray into overseas markets since it was established in 2006 to invest profits from Dubai’s airline, financial services and real estate operations. Colonial shareholders Luis Manuel Portillo, who owns nearly 40% of Colonial and resigned at end-2007 as chairman, and Juan Carlos Nozaleda, who holds 12.3%, had initially welcomed the offer from ICD.

Since Colonial has already breached loan covenants, creditors could now potentially gain control of the company, avoiding a sale to a third party and instead selling Colonial’s assets. Colonial has a property portfolio covering offices, retail and residential units valued at more than EUR 12 bn. The company is carrying debt of around EUR 9 bn, forcing it to sell some assets in recent months.