18 March 2015 – Expansión
Slim has formally announced his offer to the CNMV / The Mexican investor’s counter-bid amounts to €0.58 per share, i.e. 18% higher than Hispania’s offer. He has now guaranteed control of the real estate company through FCC and the 25% stake he intends to purchase from Bankia.
Yesterday, Carlos Slim confirmed his plan to take control of Realia through his property company Carso, by confirming to the CNMV his counter-bid for the real estate company at €0.58 per share, whereby valuing the company at €186.6 million. The offer by the Mexican business tycoon, who is the majority shareholder in FCC, is 18% higher than the bid authorised by Hispania (€0.49 per share).
The two bids are well below Realia’s value on the stock exchange; its share price closed yesterday at €0.71 (having increased by 3.6%), therefore, unless there are improvements in either of the competing takeover bids, neither will receive backing from the shareholders.
But that factor is not important for Slim, since, in practice, he is already guaranteed control of the company, thanks to an agreement (he has made) to purchase the 24.9% stake held by Bankia in Realia for €44.5 million (€0.58 per share or the best price that arises from the takeover bids). With this percentage, plus the 37% indirect stake he holds through FCC, Slim will own 62% of Realia.
Proof of the robustness of the plan set out by Slim is that his counter-bid is not conditional upon any percentage approval by the shareholders; it only requires that the agreement to purchase Bankia’s shares comes to fruition.
In the note that he sent to the CNMV yesterday, Slim ‘gave a strong signal’ to the shareholders of Realia that they should continue in the company and, therefore, not accept his offer. Carso’s objective, as well as to ensure that Realia continues trading on the stock market, is to “clean up Realia, increase its revenues and reduce its expenses, in order to undertake an active dividend distribution policy over the long term, to the extent that Realia’s financial circumstances allow it”. Through these dividends, Slim is seeking to increase Realia’s appeal to its minority shareholders, which have not received any (dividend) returns on their shares since 2008.
The only weakness in the Mexican investor’s offer is the possible reaction of the opportunistic funds that bought the majority of Realia’s debt. Specifically, Hispania signed an exclusivity agreement with Fortress, King Street and Goldman Sachs before it launched its takeover bid, whereby it committed to purchasing half of their liabilities at a discount of 21%.
The three funds hold €793 million of Realia’s total debt balance of €1,097 million. These loans, which were sold (to the funds) by Sareb, Santander and CaixaBank last year, are due to mature soon: on 30 June 2016. When the funds agreed to purchase the debt, they agreed with Realia that, in the event of a change of ownership of more than 30%, the whole amount (of the debt purchased) would have to be repaid “immediately” with one exception: the successful takeover of the company by Hispania.
The exclusivity agreement between the Socimi owned by George Soros and Realia’s funds expires after seven months, which means that Slim and these credtiors will not be able to reach any agreement until 21 September.
Despite this hurdle, sources close to the Mexican investor indicate that it will not prevent him from taking control of Realia. Firstly because there are serious doubts that more than 30% of the shareholders will agree to Slim’s takeover bid, which falls 18% below Realia’s listed share price. In addition, the same sources point out that Realia holds €450 million in cash, which it could use to repay some of its liabilities. The remaining debt could be exchanged for real estate assets owned by Realia.
Hispania has also lowered its expectations in terms of Realia. It would settle for a “financial stake” of less than 30%. Nor should an agreement between Slim and Hispania be ruled out.
Original story: Expansión (by C. Morán)
Translation: Carmel Drake