Merlin Makes A Proposal To Buy A 30% Stake In Testa

20 April 2015 – Expansión

Strategic alliance / The listed real estate company, which is increasing its share capital by €614 million, has made a proposal to the construction group Sacyr to acquire 30% of its subsidiary, which will also become a Socimi.

The scarcity of well-located real estate has led many investors to design imaginative solutions in order to invest. That is the case of Merlin Properties. The largest Socimi (listed real estate investment company or ‘sociedad cotizada de inversión en activos inmobiliarios’) on the stock exchange, with a market capitalisation of €1,714.6 million and an asset portfolio worth €2,417 million, wants to increase its assets through the purchase of a significant stake in a company and it has focused its attention on Testa, the equity subsidiary of the Sacyr group.

Testa is almost entirely owned by Sacyr (99.93% stake). The remaining shares are listed on the stock exchange. For the last few months, the company chaired by Manuel Manrique has been looking for a partner to inject capital into the subsidiary. The search by its ally eventually led Sacyr to propose a public offering of shares (OPS or ‘oferta pública de suscripción’) aimed at institutional investors in order to strengthen Testa’s balance sheet. The goal is to place 30%.

Although the stock exchange placement has already been proposed, the possibility that Merlin will acquire that percentage for around €500 million and become the preferred partner in Testa is gaining momentum, according to sources close to the process.

Both companies would lead the real estate company’s new phase, whereby Sacyr intends to convert Testa into a Socimi and so benefit from the tax advantages afforded by that company structure. This option would also allow Merlin to acquire a stake in Testa and comply with the regulations that permit Socimis to own subsidiaries or stakes in other companies of that type.

Merlin’s interest in acquiring a stake in Testa has not put a stop to the OPS for the moment. The amount of the transaction, whereby the construction group would end up controlling a 70% stake, is valued at around €500 million, according to various analysts.

The Socimi chaired by Ismael Clemente, has more than enough financial muscle to handle any transaction. On Wednesday, Merlin announced a capital increase worth €613.7 million. The real estate company will complete this transaction less than a year after it was first listed on the stock exchange, since it has already invested the €1,250 million it secured on its debut in the market. Now, the Socimi, owned by UBS, Marketfield and Gruss Capital, is evaluating new investments amounting to €2,000 million. “The company has a portfolio of projects and potential investments amounting to approximately €1,950 million, of which €170 million correspond to assets and investments being analysed on an exclusive basis or as part of a due diligence process; and another €1,780 million relating to assets and investments in the analysis phase”, says the company in an admission prospectus for the new shares published yesterday in the CNMV. The capital increase will carry preferential subscription rights and will take place between 18 April and 2 May.

Assets

Testa owns real estate assets worth €3,180 million, according to the latest appraisal performed as at 31 December 2014. These include the Torre Sacyr, in the Cuatro Torres Business Area complex in Madrid and Diagonal, 605 in Bacelona. The company owns two office buildings on the Paseo de la Castellana (in Madrid), at numbers 193 and 83, where the construction group has its headquarters. Moreover, it owns a number of shopping centres in Malaga and the Balearic Islands, as well as residential housing blocks, which it rents out. In 2014, it recorded a turnover of €187.9 million.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake

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