NH Rejects Barceló’s Offer But is Willing to Consider Other Proposals

11 January 2018 – Expansión

Yesterday, the Board of Directors of the NH Hotel Group revealed its position regarding the proposal made by Barceló to merge the two businesses. And, although it expressed its “unanimous” rejection of the offer, it did say it was willing to consider future “strategic opportunities” within the framework of “the consolidation trends that are prevailing in the sector”.

“The Board has carefully considered the fact that the proposed structure – a merger – would not allow for the creation of value for our shareholders over and above that already forecast for NH operating independently”. In its analysis, the Board does not consider appropriate “either the intrinsic value assigned to NH by the Barceló Group’s offer, or its scope or the exchange ratio offered”, according to the explanation presented to the CNMV.

The Co-President of Barceló, Simón Pedro Barceló, sent a letter addressed to NH’s Board of Directors in November, proposing the integration of the two groups to create a “national champion” with more than 600 hotels and 110,000 rooms around the world, as Expansión revealed on 20 November.

The Mallorcan group proposed taking control of 60% of the resultant (merged) company and for the remaining 40% to end up in the hands of the shareholders of the NH Hotel Group. It also set the price of the latter at €7.08 per share, which meant valuing the company at €2.48 billion.

Exchange ratio

For NH’s most senior governing body, which met yesterday for the second time to analyse the proposal made by its competitor, the exchange ratio proposed by Barceló does not reflect the relative valuation of the two companies, nor does it incorporate a control premium over NH’s share value or take into account the potential appreciation in the firm’s share price operating independently. Moreover, NH’s directors emphasised that the offer does not open a window of liquidity for its shareholders. The offer – which is non-binding and conditional upon a due diligence (detailed analysis) – proposes an integration with NH Hotel in exchange for shares issued by the latter, with the resultant company being listed. This operation, therefore, would effectively allow Barceló – which is owned by the third generation of the family of the same name – to debut on the stock market.

“The Board has valued very negatively the fact that the offer from Grupo Barceló lacks liquidity for NH’s shareholders”, reiterated the Board of the listed company.

NH’s Board of Directors includes Alfredo Fernández Agras, representative of Oceanwood (with 12% of NH’s share capital); José Antonio Castro and Jordi Ferrer Graupera, both representatives of Hesperia, with a 9.1% stake; and Ramón Aragonés, CEO of NH. By contrast, HNA does not have a presence on the Board, despite being the majority shareholder, with a 29.5% stake. The Chinese giant was expelled (from the Board) in June 2016 due to a conflict of interest after it signed a purchase agreement with Carlson Rezidor, which competes with the Spanish firm in certain European countries.

Sources at Barceló expressed their respect regarding NH’s decision, although they acknowledged that the position adopted by their rival left them with “a bitter taste since they had not been able to convince the Board of the good intentions behind the operation”. And they added: “We think that the offer was good for the Spanish hotel industry, the shareholders of NH and Barceló and the economy of the country as a whole, which would have benefitted from having a national champion to go out and compete seriously overseas”.

In response to NH’s rejection, Barceló “said the discussion was over”. According to sources at the company, “no other proposals are possible”.

The decision of NH’s Board of Directors was made public at the end of trading. NH’s shares finished trading yesterday at a price of €6.115 per share, after rising by 1.83%. Since Barceló expressed its interest in NH, the share price of the latter has increased by 22% (…).

NH closed 2016 with sales of €1.475 billion, an EBITDA of €181 million and a net profit of €30.8 million. The group’s strategic plan for the next three years forecasts a recurring profit of €100 million and an EBITDA of up to €290 million in 2019.

Meanwhile, Barceló closed 2016 with turnover of €2.855 billion, net sales of €1.98 billion, an EBITDA of €339 million and a net profit of €125 million.

At the operating level, NH has 380 hotels and 59,000 rooms in more than thirty countries, whilst Barceló owns more than 230 hotels in 22 countries and almost 52,000 rooms.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Sabadell Seeks Approval From Creditor Banks To Buy Duro’s HQ In Madrid

17 November 2017 – El Comercio

Banco Sabadell has provided a solution to unblock the complex situation that Duro Felguera finds itself in. With its proposal to purchase the building that houses the Madrilenian headquarters of the Asturian group, the firm has a glimpse of the possibility of definitively unblocking the negotiations between the company and the creditor bank.

Duro has already approved the sale of the aforementioned property to Sabadell. Now the rest of the banking pool just needs to give its approval to the purchase of the building, for which the financial entity will pay between €30 million and €33 million. If this happens, according to sources familiar with the process, the operation could be signed as early as next week. Without further ado. Because time is running out for the Asturian engineering company.

From the sale of the Madrilenian building, Duro would record revenues of €10 million, a deposit that would serve as an emergency guarantee so that, in turn, the creditor banks could release the rest of the avals, amounting to up to €31 million. In this way, the Asturian group would be in a situation to start entering into contracts once again.

It is precisely the lack of avals that has forced the Asturian group to withdraw recently from four projects, with a combined total of €918 million: the Río Grande and Novo Tempo electricity generation centres in Brazil; the LNG terminal for Octopus LNG in Chile; and the hydrocarbon storage terminal for Vopak in Panama. On Tuesday, the company itself acknowledged in a statement presenting its results to the CNMV that “the risk is limiting (the winning of) new contracts and is making it hard to push ahead with projects in the portfolio”. In this way, it justified the losses recorded during the first nine months of the year, which amounted to €11.4 million.

Although it is still pending approval from the other creditors, Sabadell’s proposal for Duro’s Madrilenian building has won favour over the other offer, presented by Sandra Ortega, the eldest daughter of the founder of Inditex, who offered a higher amount: €38 million, but on the condition that the Asturian group remain in the property as the tenant for at least three years.

The option proposed by the financial entity, which operates under the brand Sabadell Herrero in Asturias, is more aligned with the interests of the engineering company, given that the group is also negotiating the sale of the two subsidiaries that work in the building in Madrid.

Although they acknowledge that it is still early days, the firm intends to divest Núcleo Comunicaciones, a division acquired in 2011, which specialises in the defence and air, maritime and environmental control; and Epicom, a firm that has 40 employees for which Duro paid €4.6 million in 2013 and which specialises in the development of security and defence software. Núcleo’s workforce comprises 170 professionals (…).

Leasing operation

In any case, both divisions may continue to occupy the building in Madrid for as long as they form part of Duro Felguer. According to the sources consulted, Sabadell intends to sign a leasing arrangement to allow the Asturian group to continue operating in the property (…).

Original story: El Comercio (by Susana Baquedano, O. Villa and C. Tuero)

Translation: Carmel Drake

Habitat Purchase: Bain Looks Set To Pip Apollo & Oaktree At The Post

16 November 2017 – El Confidencial

Provided nothing goes wrong in the next few hours, tomorrow, Bain Capital will be the party chosen to buy Habitat, after the US fund submitted an offer that values the real estate company at around €225 million, according to confirmation from several sources in the know.

Its proposal has been valued as the best by Irea, the firm contracted to lead the sale process. And it is looking likely that, on Friday, the owner funds of Habitat – Capstone, Goldman Sachs, Bank of America, Värde and Marathon, amongst others — will endorse its opinion.

With this step, Bain will create a new real estate giant in Spain and follow in the footsteps already taken by other large investment vehicles such as Lone Star, which created Neinor, Castlelake, owner of Aedas and Värde, owner of Vía Célere.

In fact, Bain was on the verge of acquiring the company founded by Juan Antonio Gómez-Pintado, but a failure to align economic expectations undermined that operation and left the path open for Värde, which had previously acquired San José Desarrollos Inmobiliarios, to purchase the property developer.

Far from throwing in the towel, Bain has continued to insist on its strategy of acquiring a platform on which to build a large real estate company with the assets that it has been acquiring in Spain. It has purchased several non-performing loan and real estate asset portfolios from the banks, amounting to almost €2,600 million in total, although the investment made by the fund, which specialises in opportunistic operations, amounts to just one-third of the nominal value of those portfolios.

Most of the assets and collaterals acquired are residential, although Bain’s portfolio also includes properties dedicated to hotel, industrial and commercial use located all over Spain. The land and developments of Habitat, at the end of 2016, the most recent full financial year, amounted to just over €1,000 million, but its provisions of €848.5 million reduce its net valuation to €238 million.

One example is the recent purchase of €602 million in real estate assets from Liberbank, which it acquired in partnership with Oceanwood, for a discount of 65%. This operation also forms part of Bain’s accelerated plan for growth in Spain, where its objective is to get on the wave of recovery in the Iberian residential market.

Besides Spain, the fund has its sights set on Portugal, where a similar upward movement is expected, similar to that already seen in Spain over the last year and a half. In fact, in the summer, it made its debut in the country with the purchase of a portfolio of non-performing loans and real estate assets from Caixa Geral, an operation that was closed almost in parallel to the purchase of a €489 million portfolio of non-performing loans to property developers from Ibercaja.

Italy is the other market where Bain has now taken some important steps with the acquisition of a portfolio of €385 million in non-performing loans backed by real estate assets, as well as of the bad bank Heta Asset Resolution, with a portfolio of €570 million.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

Reyal Urbis Faces Key Week In Its Effort To Avoid Liquidation

29 May 2017 – Expansión

Reyal Urbis is facing a key week for determining whether or not it will receive sufficient backing from its banks and creditors to allow it to emerge from the bankruptcy in which the real estate company has been immersed since 2013 and whereby avoid liquidation.

The deadline for the creditors of the company, which is controlled and chaired by Rafael Santamaría, to communicate whether or not they accept the debt payment plan proposed by the firm, is this Wednesday 31 May.

The Tax Authority is one of Reyal Urbis’ largest creditors, given that the company owes around €400 million to the public purse, as well as to Sareb and the main financial institutions.

In the event that the real estate company does not obtain sufficient backing from its creditors, it would be forced to file for liquidation. That would constitute the second disappearance of a large real estate company after Martinsa Fadesa’s demise.

Reyal Urbis owes debt amounting to €3,572 million to the banks alone, and at the end of the first quarter of this year, it reported negative equity of €3,436 million.

The plan through which the company hopes to ensure its viability involves agreeing a unilateral payment plan with the Tax Authorities, different from the one offered to the other creditors.

The real estate company is proposing paying off the debt it owes to the financial institutions using real estate assets, an offer that, given the depreciations in values, would represent a discount (on the debt).

Overcoming paralysis

By emerging from bankruptcy, Reyal is also looking to overcome the paralysation that it has been immersed in for the last four years, during which time it has not constructed a single home and has barely managed to sell any assets or manage the hotels for rent in its real estate portfolio, covering 123,000 m2.

In this way, at the end of 2016, the company reported losses of €155 million, similar to the previous year.

In addition, Reyal Urbis’ bankruptcy procedure has been delayed, given that, at the end of 2015, Commercial Court number 6 in Madrid rejected the proposed agreement that had been presented by the company at the beginning of that year. After appealing to the Provincial Court, the real estate company managed to get the proposal agreed and processed more than a year later, at the beginning of 2017.

Original story: Expansión

Translation: Carmel Drake

DCN Would Generate 214,000 Jobs & Increase GDP By €14,000M

20 April 2017 – El Mundo

The Distrito Castellana Norte (DCN) project planned for the North of the city of Madrid, in what is known as Operación Chamartín, would generate 214,000 jobs in total, of which almost 120,000 would see the light during the construction of the project, whilst another 94,000 would be created once the building phase comes to an end. Moreover, the project, which would involve an investment of more than €6,000 million, would increase GDP by €14,000 million and would generate revenues of €3,340 million for the public administrations from the economic activity that this initiative would create.

These data are detailed in the report Effects on the creation of employment of the project to lengthen the Castellana, which has been prepared by two professors from the Universidad Autónoma de Madrid (UAM), Antonio Pulido and Julián Pérez.

The developers of the project, which group together BBVA and Grupo San José, understand that a “reductionist” project, such as the one proposed by the Town Hall would “not only deprive Madrid of the necessary infrastructure to ensure an optimum quality of life for its inhabitants and visitors, it would also inevitably have a lower capacity to generate jobs”.
During the forecast 19-year construction period, almost 120,000 full-time jobs would be created, equivalent to 0.6% of total national employment, of which 52,650 would be direct jobs, 42,037 would be indirect jobs and 23,104 would be related jobs. Of those, 80,445 would be created in the Community of Madrid.

Once the neighbourhood has been constructed, the experts calculate that the new activities that would arise in the area would result in the creation of another 94,000 jobs, of which 63,000 would be direct and 31,000 would be indirect. These would be full-time jobs, which would likely be maintained over the long term.

The development of DCN would allow the creation of 6,200 jobs each year, on average. This job creation rate would mean an average reduction in employment in Spain of 0.03%. In the Community of Madrid, the decrease would amount to 0.12% and in the city of Madrid to 0.27%.

Focus on wealth

In their report, Pulido and Pérez calculate that the construction of the DCN project, with an investment of almost €6,050 million, a figure equivalent to nearly 0.6% of Spain’s GDP, would increase domestic production by €14,000 million and would generate new income amounting to €5,400 million. 78% of the new wealth generated would remain in the Community of Madrid.

That means that the project’s contribution to GDP would amount to €286 million each year, which represents an average of €117 per Spaniard per annum. Specifically, the annual income would be €71 for every inhabitant of Madrid, €35 for every inhabitant of the Community and €1.5 for every inhabitant of Spain.

Meanwhile, the public administrations involved in the project would receive tax revenues amounting to €3,340 million, a figure equivalent to 0.6% of the annual state budget for Spain. (…).

Original story: El Mundo

Translation: Carmel Drake

Banco de Portugal Chooses Lone Star To Buy Novo Banco

5 January 2017 – ABC

The Board of Directors of Banco de Portugal has selected the US fund Lone Star to participate in the final negotiations to purchase Novo Banco. Its decision is based on the fund’s €770 million proposal, which would be accompanied by a subsequent injection of an equivalent amount to strengthen the bank’s capital.

But Antonio Costa’s Socialist Government will have the last word, and so the complex process is far from complete. Even so, it is clear that Lone Star’s offer is the most attractive, after the bid from the Chinese giant Minsheng was deemed to lack the necessary financial guarantees.

Lone Star’s only competitor in the bidding was an alliance between two other US private equity funds, Apollo and Centerbridge, whose most senior managers travelled to Lisbon to try to complete their negotiations against the clock.

The major difficulty stems from the fact that Lone Star is shielding itself through the creation of a commission bridge that holds Novo Banco’s non-strategic assets. Novo Banco is the cleaned up heir of the now extinct entity Espírito Santo. That situation is something that concerns the Portuguese Finance Minister, Mário Centeno, to such an extent that he has even raised the possibility of nationalising the entity.

In any case, the proposal from Lone Star falls well below the figure required for the operation to be considered a success by the Portuguese State, given that it put €4,900 million on the table in 2014 to avoid the total collapse of the entity when Espírituo Santo went bankrupt that same year.

Original story: ABC (by Francisco Chacón)

Translation: Carmel Drake

Saba & Ardian Bid For Spain’s 3rd Largest Car Park Group

17 May 2016 – Expansión

A dozen “Spanish and international” candidates have submitted bids for the purchase of Parkia, the third largest car park group in Spain, owned by the Nordic fund EQT. Market sources say that the candidates include major companies in the sector, such as Saba, Indigo (controlled by the investment fund Ardian), Interparking and Empark, as well as financial groups specialising in infrastructures, such as Infravía.

Some sources also include Globalvía on the list of interested parties, but a spokesperson for the concessionaire said yesterday that they are not going to submit a bid for Parkia. Sabadell is also expected to submit a bit, thanks to its partnership with the funds Altamar and Firmium, through which it plans to invest more than €150 million in car parks in Spain.

The exact amount of the bids has not been revealed, but sources state that the perceived competitiveness and facilities available to investors to leverage the transaction have helped to boost the price. Sources in the know indicate a valuation range for the whole company of between €300 million and €350 million, which would represent between 15x and 17x of the forecast EBITDA for 2016, which is expected to amount to €20 million.

EQT must decide “in the next few days”, say the sources, which bidders will make the cut and proceed to the next phase of the process, which will involve a period of due diligence (audit of the assets), in which the potential buyers will analyse the company in detail so as to prepare their binding offers.

The plan is to select between “three and five” investors from the initial interested parties, who will participate in the definitive bid. The aim is to complete the process by the end of July.

Although the operation is moving ahead, the role of Mutua Madrilña – the co-owner of Parkia with 33.2% of the capital – is still uncertain. In theory, the Spanish insurance company plans to retain its stake in the car park manager, but that will depend on the conditions that EQT ends up agreeing, say sources. Mutua declined to comment on the deal. (…).

Parkia owns 58 car parks, with a total supply of 27,000 parking spaces and an average concession life of 30 years. The company’s revenues amounted to €33 million last year. (…).

Original story: Expansión (by M. Ponce de León, D. Badía and C. Morán)

Translation: Carmel Drake

US Group With Links To Coppola Submits Bid For ‘Ciudad De La Luz’

19 April 2016 – Expansión

The Generalitat Valenciana, which owns the Ciudad de la Luz film studios in Alicante, has received at least one offer in the auction for the facilities. Cinespace, formed by several professionals from the film industry with links to the director Francis Ford Coppola, has presented a proposal for almost €20 million. The US investors already expressed their interest in the site in 2014. The amount offered falls well below the minimum price of €47.2 million established in the information memorandum.

Original story: Expansión

Translation: Carmel Drake

Carmena: Town Hall In Talks With Wanda Over Edificio España

27 January 2016 – El Economista

At a press conference yesterday (Tuesday), the mayoress of Madrid, Manuela Carmena, announced that the Town Hall of Madrid has made “a new proposal” to Wanda regarding its Edificio España project…and she added that she does not expect the Chinese investor group to abandon the project, given that it is continuing to participate in negotiations. (…).

Representatives from the Town Hall of Madrid reportedly met with the Chinese investor group last week and the conversations are on-going. (…).

At no point has the possibility of demolishing the façade and rebuilding it brick by brick been entertained, given that it is something that is actually technically unfeasible. The solution involves aligning legal compliance and maintaining the protected features, with the transformation of building that Wanda wants to undertake. (…).

Lots of options

In light of the widespread media attention, Carmena said that “our conversations with the group are on-going” and she added that the Town Hall “is very interested in the fact that this group may construct a hotel in Plaza de España”. (…).

The delegation pointed out that the protected features are not determined by the Town Hall, but rather by the Local Heritage Committee, in which the Town Hall participates and which is chaired by the Community of Madrid, which holds the majority. At the time, thhat body ruled that “it was feasible to undertake the building work, whilst maintaining the protected features”, in other words, it ruled that the proposal to demolish the façade was not an option. (…).

José Manuel Calvo, from the Department for Sustainable Urban Planning, insisted that the project was progressing “as normal”, given that talks are on-going with the company, just as they are with other companies. This normality manifests itself by the fact that the Town Hall has already prepared the compulsory detailed study and that it will process the initial approval as soon as the investor group gives them the go ahead. The Town Hall “will be delighted” to proceed. Following that approval, construction work may begin within two or three months.

The representative of the Department for Sustainable Urban Planning added that if the construction work begins, the Town Hall reserves the right to “secure guarantees” from Wanda to ensure the progress of the work. (…).

Meanwhile, Manuela Carmena answered that “of course she was unable” to guarantee that the renovation of Edificio España would be completed before the end of her term in office because she doesn’t even know how long the construction work will take. (…).

When asked about whether the Town Hall would be more flexible in the face of the hypothetical exit of the investor, Carmena answered that the Town Hall “is not afraid”, but does have a “responsibility” to ensure that Madrid is a more “beautiful and prosperous” city. (…).

Original story: El Economista

Translation: Carmel Drake