French Tour Eiffel's board backs insurer's bid

The board of French REIT Société de la Tour Eiffel has advised shareholders to accept mutual insurer SMABTP's €58-a-share bid for the company which values the group at €363 mln.

The SMABTP bid offers a higher price and a stronger guarantee of the continuation of the existing strategy than a rival bid from dissident shareholder Chuc Hoang, the board said in an official statement.

'After deliberation, the board of directors unanimously considers that the SMABTP offer is in the best interest of the company, its shareholders and its employees,' the board added.

SMABTP has raised its bid twice from an initial €48 and a second bid of €53. The latest offer of €58 is in line with the company's EPRA triple net NAV of €58.10 at year-end 2013.

Shareholder Chuc Hoang, who owns just over 30% of STE, is offering €55. He has been battling for control of STE for most of this year after having criticised STE's management and the company strategy, which focuses on value-add offices in Grand Paris. He also questioned STE's decision in 2013 to acquire a Paris office building from UK private equity firm Patron Capital through a new share issue. Patron broke off talks shortly thereafter.

Hoang's bid values STE at €344 mln and is being partly financed by funds advised by US private equity group Colony Capital through the subscription of bonds that are partly redeemable in STE shares, for up to 10% of the firm.

Hoang said he would aim to keep STE's REIT status, which would bind him to a holding of no more than 60%. However, STE's board said there is still a risk that he would not be able to keep STE in the REIT tax-efficient regime.

The board is also supportive of SMABTP's commitment to subscribe to a capital increase to be carried out by STE to strengthen its finances.

Currently STE has a €701 mln portfolio comprising 393,360 m2, some 65% of which is Paris offices. If its bid is successful, SMABTP said it plans to double the portfolio within the next three to five years while providing liquidity to reduce loan-to-value. SMABTP is the leading insurance group in France for the construction and public works sector.