Sacyr Invites Alternative Offers For Testa

8 May 2015 – Expansión

The construction group has engaged Lazard to coordinate offers for its real estate subsidiary Testa. It was initially planning to place 30% of the shares on the stock exchange (but is now open to alternative proposals).

Sacyr was going to place 30% of Testa‘s shares on the stock exchange, but the widespread interest expressed in the market has caused the construction group to change its strategy. The company, which had proposed a public offering (IPO) of 30% of Testa’s shares to the CNMV, is currently evaluating several alternatives: to continue with the plan to place some shares in the market with qualified investors; to join forces with an institutional partner such as a Socimi or international fund; and in the meantime, it does not rule out the sale of 100% of its subsidiary. Moreover, it is also considering a fourth option, which would have a much greater strategic significance, namely the integration of Testa with a large group in the sector, in this case, Colonial, to create the largest Spanish real estate company and one of the largest in Europe.

Sacyr has engaged Lazard to carry out this process. The investment bank has instructed the various investors that are interested in Testa to make a non-binding offer for the company.

Proposals will be welcomed both for the 30% stake that Sacyr had initially planned to place on the stock exchange, as well as for the entire share capital. Lazard has given interested parties until today to present offers, say sources close to the process. One player that is interested in acquiring the real estate company is Merlin Properties. The largest Socimi by market capitalisation has acknowledged its interest in participating in Testa’s capital. Now, Merlin would be willing to acquire Testa in partnership with other investors and purchase 100% of the company, according to sources in the sector.

Corporate movement

Sacyr is also studying a possible integration of Colonial and Testa. For the time being, the conversations are very preliminary between Sacyr and the real estate company whose primary shareholder is Juan Miguel Villar Mir.

The merger of both companies would create a giant with more than two million square metres of leasable surface area in prime areas of Madrid, Barcelona and Paris and a combined turnover of €400 million. Testa’s market capitalisation amounts to €2,098 million and Colonial’s is €1,977 million.

Sources involved in the process confirm the interest shown by Colonial. The final decision will depend on the other options that Sacyr has on the table. The placement of a percentage of new shares in Testa on the stock market (a maximum of 30%) forms part of the action plan designed by Sacyr to regularise the finances of its subsidiary and provide it with greater liquidity. The shareholders of the real estate company, controlled by Sacyr (99.2%), approved an ‘accordion operation’ in February, involving a €1,197 million contribution to shareholders, comprising a €527 million ordinary dividend and a €669 million reduction in share capital.

This transaction is, in turn, subject to a simultaneous capital increase that would enable Testa to reconstruct its balance sheet through the inflow of around €500 million. It is during this phase that Colonial may enter the fray.

The real estate company chaired by Juan José Brugera is exploring growth opportunities in Spain after cleaning up its balance sheet in 2014 with a capital increase of €1,263 million, which involved the entry of Juan Miguel Villar Mir, along with Mora Banc and Qatar Investment into the share capital of the real estate company. Villar Mir is currently the owner of 24.5% of Colonial, after buying a new block of 1.46 million shares (in recent weeks).

According to experts, the potential merger of Colonial and Testa makes sense in business terms, since both companies specialise in the rental of buildings; exclusively office buildings in the case of Colonial and shopping centres and homes in the case of Testa.

Nevertheless, the change in ownership may have an impact on the financial structure of the companies, with guarantees linked to new investments and changes of control. At the end of 2014, Colonial’s net debt amounted to €2,545 million and Testa’s amounted to €1,688 million.

Original story: Expansión (by R. Ruiz and C. Morán)

Translation: Carmel Drake

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