France's Eurosic in €250m capital hike

French REIT Eurosic is carrying out a €250 mln capital increase through the issue of warrants to its existing shareholders, at a price of €35.72 per share.

The group, which is largely owned by Groupe Batipart, Covéa, Predica and Assurances du Crédit Mutuel, said the subscription period will run from June 23 to July 23.

Eurosic's largest shareholders, representing 95% of the share capital, have already committed to subcribe to the offering.

Together with existing cash of around €150 mln as well as €600 mln of debt, the proceeds from the offering will be used to fund the company's €900 mln acquisition of nearly 89% of peer SIIC de Paris from shareholders Société Fonciere Lyonnaise and Realia.

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

Eurosic bought 58.95% of SIIC de Paris from Spain's Realia at €21.77 per share, and subsequently acquired 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.

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%.