Fonciere des Regions poised to buy 35% of Beni Stabili

Fonciere des Regions (FDR) is to launch an all-share bid to acquire a 34.6% stake in Italy's second-largest real-estate company, Beni Stabili, from Delfin, a company controlled by Beni Stabili's chairman Leonardo del Vecchio. Fonciere Des Regions, France's fourth- biggest real estate investment trust, will also launch a mandatory exchange offer for all of Beni Stabili's shares, subject to shareholders' approval on May 1, 2007, FDR announced during a press conference on Monday.

Fonciere des Regions, chaired by Christophe Kullmann, is planning to retain a 51% stake in Beni Stabili when the Italian company is converted into a SIIQ, the Italian real estate investment trust, 'in order to benefit from the new tax regulation and the new opportunities expected to arise from the introduction of REITs'. FDR's strategy in relation to Beni Stabili will be conditional on the final text of the SIIQ regime to be published by the end of April. FDR said that, although it is planning to transform Beni Stabili in a SIIQ, 'there is no obligation to convert Beni Stabili by the end of the year,' and the process is likely to take longer if considered that the company is not ready and depending on Italy's new REIT legislation.

Under the proposed SIIQ regime to be clarified by the government in April or May, SIIC companies will be obliged to have a 35% free float and a maximum shareholder stake of 51%. At the same time the legislation will introduce similar a tax-free structure to France, making takeovers involving companies in the two countries easier. FDR also said it is not contemplating a merger with Beni Stabili.

The transaction is in line with FDR's strategy to diversify geographically, while focusing on few selected market. 'Beni Stabili will be FDR's Italian subsidiary in the office and retail markets. We don't want to invest in many countries but we want to become stronger in Germany and Italy, duplicating FDR's success in France'. The Paris-listed investment group has said it expects the transaction 'to increase the sustainability of the company and the average quality of its portfolio'. Beni Stabili has top-quality assets spread across Milan (40%) and Rome (10%) valued at EUR 10 bn. The 71% of the assets are located in the north of Italy.

Fonciere has offered one new stock for every 100 Beni Stabili's shares, less a special dividend of EUR 7.50 a share. The bid values Beni Stabili at EUR 2.6 bn, EUR 1.53 per share, which represents a premium for Beni Stabili's closing share price on Friday of circa 10%. Following the offer, FDR will have net assets exceeding EUR 14 bn, of which EUR 7 mln in France, EUR 3 bn in Germany and EUR 4 bn in Italy. The new group will provide about 35% of offices, 60% of logistics and 5% in car parks.

Fonciere is obliged by law to launch a full-bid for Beni Stabili, and the group is planning to ask the French regulator for an exemption. The transaction is also subject to the approval of Fonciere des Region's shareholders, the Italian market authority Consob, the bank of Italy and it also needs a waiver from the French market authority AMF.