Vienna- and Warsaw-listed property group Immofinanz said on Wednesday that it is considering new, more profitable options with regards to its stake in fellow Vienna-listed real estate company CA Immo.
Nearly two years after first announcing plans to merge with CA Immo, Immofinanz said it will not resume discussions 'for the time being' as it evaluates other strategic options including the potential sale of the CA Immo stake at a profit. Immofinanz's 26% holding in CA Immo is valued at around €660 mln.
The Austrian firms agreed to merge in April 2016 to create one of the biggest real estate groups in central and eastern Europe, on condition that Immofinanz sold its Russia portfolio first, which took until late last year.
Immofinanz closed the sale of its Russian retail portfolio to Russia's Fort Group for around €900 mln in December 2017, and was expected to resume merger discussions with CA Immo in early 2018.
In a statement, Immofinanz said that the strategy change is linked to 'the expected improvement in corporate indicators during the coming quarters' which the company feels should be incorporated in potential future negotiations with CA Immo 'for the benefit of shareholders'. 'The possible merger of the two companies during the 2018 financial year is therefore no longer expected,' it added.
Immofinanz's financial results are expected to strongly benefit from the sale of the Russian portfolio, which has continued to shed value over the past few years and represented a major burden on the company's liquidity.
Immofinanz reduced its net loss from €409 mln in the first three quarters of 2016 to €59 mln in the same period last year, and significantly improved its financing structure over 2017. The value of its portfolio (excluding Russia) rose by €11.3 mln in the first three quarters of 2017, compared to a de-valuation of €103 mln in the previous year.
According to CEO Oliver Schumy, the company also has additional earnings potential in the form of an undisclosed reserve of up to €145 mln, that is connected with future revenue-based earn-outs and possible tax refunds.
'Immofinanz intends to concentrate on further strengthening its operating development and on the benefits of its investment in CA Immo during the coming months in order to create added value for its shareholders,' the company said in a statement.
Immofinanz was first urged last year to terminate merger talks with CA Immo by shareholder Petrus Advisers. In a letter to CA Immo's chairman of the supervisory board Torsten Hollstein, the London-based investor said at the time that the proposed merger was a 'waste of money and time'.
Petrus said it had calculated a potential rise of 40% in Immofinanz shares if it bought CA Immo instead of merging and a similar increase if the company sold its CA Immo stake.
