Dubai sovereign makes EUR 3b bid for Colonial stake

Colonial's shareholders said on Thursday that they have asked the Investment Corporation of Dubai (ICD) to make changes to the EUR 3 bn takeover bid launched late on Wednesday. In a statement to the Spanish stock market regulator, Colonial's shareholders added they wanted more information about the conditions of the offer and said they hoped to take a decision on it 'as soon as possible'.

The Spanish firm saw its value more than halved in just six months after it emerged that management of the debt-laden company bought derivatives of its shares, using the stock as guarantee. The Dubai fund said 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 offer represented an 8.8% premium on Colonial share's closing price of EUR 1.70 on Tuesday.

The move, if successful, would mark 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%, have already agreed to accept an offer from ICD. However, since Colonial has already breached loan covenants, creditors could 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. In recent months the company has sold off some office assets to help reduce its debt. GE real Estate and French property group Gecina have both pulled out of talks on a possible merger.