French REIT Eurosic has agreed to acquire an interest of nearly 89% in peer SIIC de Paris from shareholders Société Fonciere Lyonnaise and Realia, in a deal which gives it full control of the €1 bn business park landlord.

French REIT Eurosic has agreed to acquire an interest of nearly 89% in peer SIIC de Paris from shareholders Société Fonciere Lyonnaise and Realia, in a deal which gives it full control of the €1 bn business park landlord.

In total, Eurosic is forking out €870 mln mln for the combined 89% shareholding in SIIC de Paris, and it plans to buy out the remaining 11% stake in a second stage. In case over 95% of the SIIC de Paris shares is tendered, the company will be taken private and merged with Eurosic.

'This transaction represents a major step in the development of Eurosic, as it doubles the size of its portfolio, it strengthens the average quality of its assets, with a focus on the centre of Paris and on operations with value creation potential, particularly in Paris and La Défense,' commented Yan Perchet, CEO of Eurosic.

Eurosic bought 58.95% of SIIC de Paris from Spain's Realia at €21.77 per share, and subsequently an additional 29.63% interest from SFL for a price of €24.22 per share less any future dividend. It is offering €24.22 a share for the remaining stake.

The bid compares to a closing price of €19.19 for SIIC de Paris shares on the day prior to the launch of the offer. This price includes compensation to SFL for giving up rights arising from its shareholder pact with Realia, Eurosic said. SFL, which bought its stake in SIIC de Paris in 2010, was granted a pre-emption right to buy the remaining interest in the company in case Realia would sell off.

Closing is expected for July 2014.

The acquisition will enable Eurosic to double its portfolio to around €2.9 bn from €1.4 bn at present. Eurosic, a real estate investment trust focused on value-add transactions, has been actively selling and buying assets over the past few months in a major strategy change introduced in 2011 by its new owners, Charles Ruggieri's Batipart, Prédica Covéa and Assurances du Crédit Mutuel.

To finance the purchase, Eurosic will use existing cash of around €150 mln as well as €600 mln of debt provided by Natixis and BNP Paribas. It also plans to carry out a capital increase at a price of €35.72 a share. Its major shareholders have committed to subscribe to up to €240 mln.

Although the operation is expected to increase Eurosic's debt ratio, the company said it plans to bring it back below 45% loan-to-value mainly through the sale of mature assets.

SIIC de Paris posted a net profit of €15 mln in 2013 and rental revenues of nearly €70 mln. The company has a low loan-to-value ratio of 30% and a portfolio valued at €1.5 bn, largely consisting of commercial properties in Paris. The occupancy rate stands at 73% compared to 99% for Eurosic's assets, resulting in a combined occupancy rate of 92%.

Realia's disposal is part of a strategy by its owners to facilitate the sale of the property company. Realia's shareholders FCC and Bankia have been looking to split the company into the French and the Spanish businesses to make it easier to find a buyer.

Orion Capital Managers and AEW Europe have reportedly been selected as the final bidders for the stake in Realia. Bankia owns 25% in Realia while FCC controls 36.9%.

SIIC de Paris is the latest French real estate investment trust to change hands. French mutual insurance group SMABTP is looking to buy a major stake in French REIT Société de la Tour Eiffel while a Qatari investor has recently acquired an 8.55% stake in SFL from Credit Agricole Corporate & Investment Banking.