Immofinanz, CA Immo to Merge After Their Rival Bids Failed

  • Companies revisit last year's hostile battle on friendly terms
  • Immofinanz to sell convertible bond, Russian assets for deal

Immofinanz AG and CA Immobilien Anlagen AG plan to merge in a transaction that would create the biggest commercial property group in central and eastern Europe, following a hostile takeover battle that ended without a deal last year.

Immofinanz agreed to buy a 26 percent stake in CA Immo from Russian billionaire Boris Mints’s O1 Group Ltd. in a first step to a full merger, the company said in a statement on Monday. Immofinanz will sell or spin off its five Russian shopping malls before combining with CA Immo to create a company with real estate assets of about 6 billion euros ($7 billion) in Austria, Germany and several eastern European countries.

“The merger makes absolute sense” for the companies, because they have similar assets and the deal allows them to cut costs, said Thomas Neuhold, an analyst at Kepler Cheuvreux in Vienna. Whether the merger appeals to shareholders will depend on the price, he said.

CA Immo and Immofinanz both failed last year with bids to buy a stake in each other amid an acrimonious takeover battle between Vienna’s two biggest commercial property developers. After the disagreement ended almost a year ago, key shareholders said at the time they remained interested in working together.

Shares Climb

CA Immo rose as much as 12 percent in Vienna trading to 19.5 euros, the highest since September 2007, and were up 3.2 percent at 1:10 p.m. Immofinanz was 1.6 percent higher after climbing as much as 4.5 percent. Immofinanz has a market value of almost 2 billion euros, compared with 1.8 billion euros for CA Immo.

While CA Immo’s portfolio is focused on office space in Germany and Austria, Immofinanz also has a large presence in eastern Europe. Its Russian shopping malls, with a net asset value of about 500 million euros, have been hurt by the weak economy and the decline of the ruble. Immofinanz wrote down the business by 400 million euros last month.

The companies will achieve about 33 million euros of annual cost savings through the merger, Immofinanz CEO Oliver Schumy told journalists in Vienna.

Immofinanz agreed to buy O1’s stake for 604 million euros, or 23.50 euros a share, a 35 percent premium on Friday’s closing price. It will also buy O1’s four registered shares. It plans to finance half of that with a convertible bond, about 200 million euros with cash, and the rest with a bridge loan.

Buwog Option

Immofinanz may also sell shares in its former residential unit, Buwog AG, to finance the deal, Chief Financial Officer Stefan Schoenauer said in a conference call with analysts Monday. Immofinanz’s 29 percent Buwog stake has a market value of about 540 million euros.

Both companies’ shareholders would become owners of the combined group. The ownership ratio will be based on valuations carried out by court-appointed auditors, the companies said. The valuations will then be put to a vote at both companies’ general shareholder meetings next year, where they will need to gain 75 percent approval.

In a joint statement with Immofinanz, CA Immo CEO Frank Nickel said the deal could create “substantial synergies.” Immofinanz Chairman Wolfgang Ruttenstorfer said a combination is “the logical evolution” for the company.

Mints’s O1 bought 16 percent of CA Immo for 18.50 euros per share in 2014, then increased its stake with a public offering at the same price.

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