Slim Launches €2,800M Takeover Of FCC

7 March 2016 – Expansión

On Friday, the Mexican tycoon Carlos Slim (pictured above) announced a takeover bid for 100% of FCC, after taking ownership of 36.5% of its share capital. Slim is proposing a cash offer at €7.60 per share. This price represents a premium of 15.3% with respect to Friday’s closing price of €6.59. The company has 260.5 million shares in circulation. Together with the other 118 million shares that the company is issuing through its current capital increase, Slim’s offer values the group at €2,870 million.

Slim is launching the takeover after exceeding the 30% threshold set by Spanish legislation for mandatory takeovers. On Friday, Slim explained to Spain’s National Securities Market Commission (CNMV) that it, directly or indirectly, controls 29.558% of the voting rights through Control Empresarial de Capitales (CEC), a subsidiary of Inversora Carso (IC), plus it has been “attributed” another 7.036% of the share capital. According to financial sources, this latter percentage comes from the pledge made in relation to the loans granted to Esther Koplowitz, FCC’s other major shareholder.

Obligation

The possibility of the FCC takeover has been on the cards since Slim agreed to refinance FCC, but until now it was unclear how he was going to be able to exceed the share capital threshold of 30%, beyond which level the obligation to undertake the operation is legally activated.

Slim acknowledges that “IC is obliged to make a public offer for the acquisition of all of FCC’s shares and to address that offer to all of the shareholders at a fair price”. Slim’s takeover of FCC’s capital requires the sudden takeover of Portland, the cement subsidiary of the construction and services group.

As a result, Slim announced another takeover on Friday, in this case of Portland, in parallel to the takeover of FCC. It will be launched by FCC itself and will involve the group delisting from the stock exchange.

The takeover of Portland, also in cash, will be made at €6 per share, which represents a premium of 14% above the closing price on Friday (€5.26) and 12% above the price on Thursday. At that price, Portland is worth around €310 million, compared with €272 million based on its list price on Friday.

FCC already controls 77.94% of Portland, which means that the takeover is targetted at 22% of the share capital. Following the takeover, Portland will no longer be listed on the stock market. Investors that do not participate will lose out in terms of the liquidity of their shares. Although Slim is offering a premium for his takeover of FCC, the price still falls below the price at which he purchased his shares (€9.75), which means that it will only partially offset the excess over book value at which his stake is recorded.

Original story: Expansión (by C.Morán and M.Á.Patiño)

Translation: Carmel Drake

Popular Puts RE Assets Worth €8,000M Up For Sale

20 January 2016 – El País

Banco Popular has made a commitment to investors and analysts to sell around €8,000 million in real estate assets that were foreclosed due to non-payment during the financial crisis. This amount represents approximately 30% of its bad bank, into which the entity led by Ángel Ron has placed the assets that have depreciated by the most and which are provisioned. In this way, the entity may be able to clean up its balance sheet.

Market sources believe that if Banco Popular ends up achieving this objective, it will generate profits of around €200 million, thanks to the recovery of provisions already recognised and the lower operating costs that will result from the disposal of such a large volume of properties. The entity declined to comment on its plans. The proposed real estate operation is seeking to change this negative trend, which reflects the doubts over its future.

The transaction will be divided into two parts: on the one hand, the entity led by Ángel Ron plans to set the branch network a target of selling €4,000 million of properties, which would require it to double the volume of sales recorded in 2014 and last year. The bank will try to take advantage of the improvement in the real estate market in recent months to avoid making losses on its sales.

On the other hand, Popular is negotiating with various real estate and vulture funds, regarding the creation of a special vehicle into which it would place €4,000 million of assets linked to property. The entity has not managed to close any agreement with these investors yet because the discount they are demanding is very high and it is not willing to accept such a reduction.

The perils of the stock exchange

Popular is the subject of numerous rumours about a possible takeover by one of the three largest entities (in Spain), which may be seeking to take advantage of its significant decline on the stock exchange. Nevertheless, “the entity complies fully with the (capital) requirements established by the supervisor”, according to an explanation provided by its managers in December, after figures were published showing that it complied with the ECB’s capital requirements.

Despite that, Popular’s share price has decreased by 23% in the last month and is trading at its lowest level for a year. The market value of its shares on the stock exchange amounts to just over €5,000 million, which makes it an attractive bank given its business model, and its significant penetration in the SMEs and retail markets. Popular’s share price is trading at a five year low.

Popular has always refused to participate in any operation in which it would lose control of the merged entity, but it has also admitted that anyone wishing to acquire the bank will have to pay a high premium to the shareholders. Meanwhile, the market is punishing its market capitalisation: Bankinter, which has assets amounting to around €60,000 million, compared with Popular’s €160,000 million, is worth more than Popular on the stock exchange. Bankinter’s market capitalisation amounts to around €5,400 million, i.e. around €400 million higher than Popular’s.

Original story: El País (by Iñigo de Barrón)

Translation: Carmel Drake

JP Morgan Declares That It Holds A 3% Stake In Realia

2 December 2015 – El Economista

JP Morgan has declared that it holds a 3.1% stake in the share capital of Realia, a percentage valued at €7 million on the basis of the current market price of the real estate company controlled by Carlos Slim.

In this way, the entity has become a shareholder of the company in which Slim holds a 25.10% stake and FCC, the construction group in which the Mexican businessman also holds a stake, holds another 36.8%.

JP Morgan holds a package of 9.55 million shares in Realia, and therefore on 25 November, it exceeded the 3% capital threshold in the firm that requires it to declare its stake, according to the registers of Spain’s National Securities Market Commission (CNMV).

The entity has taken this position in the real estate company after Carlos Slim took control of the firm through a public share acquisition (takeover) and the real estate company announced a capital increase with a view to strengthening its financial structure.

The capital increase will amount to €87 million, and Slim has already expressed his commitment to participate in the operation, whereby he will inject around €21 million.

With this operation, Realia seeks to strengthen its financial structure, as a preliminary step prior to the launch of the restructuring of the company’s debt, which amounts to €1,067 million, half of which matures next year, in June 2016.

The clean up of the real estate company constitutes one of the main objectives of the new majority shareholder, as stated in the prospectus for the takeover that he launched for the company.

Original story: El Economista

Translation: Carmel Drake

Realia Launches €87M Capital Increase

11 November 2015 – Cinco Días

Realia has approved the launch of a capital increase amounting to €87 million, which the real estate company’s majority shareholder, Carlos Slim, has promised to participate in, according to the company.

By virtue of the operation, the real estate company will issue 150 million new shares at a price of €0.58 per share, the same price that Slim paid in the takeover (OPA) through which he took control of the company.

With this operation, Realia is seeking to strengthen its financial structure ahead of the company’s debt restructuring program. In total, Realia’s debt amounts to €1,067 million, of which half is due to mature within the next few years.

Original story: Cinco Días

Translation: Carmel Drake

Goldman Enters The Bidding For Testa’s 1,500 Homes

5 November 2015 – Expansión

Testa’s residential portfolio is attracting interest from the large international funds. In October, the Socimi Merlin Properties commissioned Deloitte and CBRE to handle the sale of Testa’s residential portfolio, after acquiring the real estate company from Sacyr in June for €1,793 million.

Merlin, whose takeover of 100% of Testa was approved on 28 October, has taken the decision to divest the residential and hotel portfolios of the new company, which it has converted into a Socimi. The first process involves the sale of 1,519 homes spread across eleven buildings in Madrid, Toledo and Guipúzcoa. CBRE and Deloitte have invited interested parties to submit their bids within the next few days. The porfolio, which includes both unsubsidised and social housing properties, as well as around 30 commercial premises, has already attracted interest from international funds such as the German fund Patrizia and the US fund Blackstone, as well as from the real estate company Hispania. According to sources in the sector, Goldman Sachs has also now joined the list of candidates.

Goldman Sachs owns a sizeable residential portfolio at the global level. And it has already made a couple of purchases in Spain. The largest was in 2013, when it acquired 3,000 homes managed by the Community of Madrid’s Housing Institute (Ivima) for €201 million. At the beginning of this year, Goldman also acquired a batch of 18 buildings from the property developer La Llave de Oro, in Barcelona. It paid €90 million for this portfolio, which included 13 unsubsidised housing buildings, three more social housing buildings and two retirement homes.

The sales process, in which Merlin also offers buyers the option of purchasing 640 parking spaces, will allow the Socimi to generate income of around €300 million, money that it will use to reduce Testa’s debt ahead of its integration with Merlin.

Refinancing

In parallel, the real estate company is working to restructure the debt it has associated with Testa, which amounts to around €1,600 million. The objective is to “adapt the current repayment structure to match the cash generated by the company”, says Merlin in the takeover brochure presented to the CNMV.

Merlin plans to take ownership of 100% of Testa – it currently holds a 77% stake – before July 2016. Once the two companies have merged, the new Socimi will hold assets worth €5,800 million and will generate revenues of more than €300 million per year.

Merlin’s share price dropped by 2.9% in trading yesterday to €11.38.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Socimis Raise A Further €2,600M As They Lead RE Purchases

7 August 2015 – Expansión

Merlin Properties, Axiare, Hispania and Lar España have now spent all of the money they raised through their IPOs last year, after investing almost €5,000 million in assets between them.

The Socimis are gaining financial muscle as they continue to lead the new property boom. Merlin Properties, Axiare, Hispania and Lar España, the four large Socimis, have increased their share capital by almost €2,600 million in recent months, attracting funding from several major investors.

The companies, which have invested almost €5,000 million in the acquisition of all kinds of assets, have already spent all of the money they raised from their debuts on the stock exchange last year. The Socimis are the stars of the recent significant increase in investment in real estate assets, which reached a record figure of €5,264 million during the first six months of 2015.

The first company to list on the market was Hispania. The real estate company controlled by Azora requested a capital increase at its shareholders’ meeting in December to finance its purchase of Realia. At the time, Hispania planned an initial round to raise funds from its shareholders, but that transaction was foiled after the Socimi’s bid for Realia was exceeded by a counter-bid from Carlos Slim. In April, Hispania proposed a further extension of up to 50% of its share capital in order to purchase new properties. It achieved its objective of raising €337 million in just three hours.

Hispania has made investments worth €1,107 million, since its debut on the stock exchange in March 2014, including Project Bay, the hotel Socimi that it is developing jointly with Barceló.

A few months ago, Merlin Properties, the largest Socimi on the Spanish stock exchange, raised €613.8 million. Merlin, which already had a portfolio worth more than €1,250 million at that stage, was planning to continue with its acquisition of properties, mainly offices and retail assets. Nevertheless, in the midst of this strategy, the Socimi decided to embark on an ambitious corporate transaction: the purchase Testa, the real estate arm of Sacyr. The acquisition turned Merlin into the leader of the office business in Spain, as it took ownership of a portfolio worth €3,231 million, containing assets such as Torre Sacyr in Madrid.

In the end, the transaction closed for almost €2,000 million, of which €1,793 million was paid to the construction company and €183 million was injected into Testa as cash. Merlin has recently completed a new capital increase amounting to €1,034 million to finance this purchase. The Socimi is funding the transaction through its own shareholders, which have already expressed their support for the transaction, according to sources close to the company.

The other two Socimis on the Stock Exchange, Axiare and Lar España, also announced their own capital increases, in June and July, respectively. (…).

Other capital increases

The Socimis are not the only entities that are taking advantage of the international funds and management companies to invest in the Spanish real estate sector. So too are the traditional companies in the sector.

Quabit, the real estate company controlled by the construction group Rayet announced its own capital increase in June amounting to €70 million with the aim of raising funds to start new projects.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake

Realia’s Board Warns Against Slim’s Offer, But To His Benefit

6 July 2015 – Expansión

Although it may seem contradictory, Realia’s negative assessment of Carlos Slim‘s offer, announced by the real estate company’s Board of Directors yesterday, may be beneficial for the interests of the Mexican investor. If the minority shareholders (who hold a 38% stake) follow the Board’s recommendations, then they will not accept the takeover bid and that will allow Slim to reduce his offer and, at the same time, avoid one of the clauses that would activate the early repayment of some of Realia’s loans, amounting to €790 million.

Through Carso, Slim already holds effective control over the real estate company through his direct stake of 24.9% (he purchased Bankia’s stake for €44.5 million) and his indirect stake of 37% held through FCC (which has announced that it will not participate in the takeover bid), where he is the majority shareholder with a 25.6% stake. As a result, he exerts control over Realia, with a stake of almost 62%.

Carlos Slim launched a voluntary offer for 100% of the real estate company at the same price as he acquired the shares from Bankia (€0.58 per share), which exceeds the offer submitted by Hispania (€0.49). Both rival bids have now entered a competitive process, which the CNMV will settle within a period of 30 days.

Although Realia’s Board described the offer as “unreasonable”, it does appreciate certain features of Slim’s takeover bid. The offer from the Latin American tycoon falls 19% below the real estate company’s market price (€0.69), but it is 18% higher than Hispania’s bid. Moreover, Realia’s Board (the Mexican’s representative, Gerardo Kuri, did not participate in the deliberations) appreciates: the fact that the bid amount would be paid in cash; that the bidder is “a company with extensive experience in the real estate sector; and that the bidder would bring stability to the shareholder structure of the company”, which has promised to restore dividend payments as soon as possible and ensure the continuity of the company on the stock exchange.

Renegotiation

Slim has been working on the company financing side of the Realia transaction for a long time. Realia’s main creditors are Fortress, King Street and Goldman Sachs. The funds, which together loaned Realia €790 million of its total debt of €1,000 million, signed an exclusivity agreement with Hispania. They could declare the early repayment of the liability, with just five days notice, if Slim’s shareholding were to exceed 30% and there was a change in Realia’s controlling shareholder.

(…)

Slim and Hispania still have time to improve their offers, up to five working days before the end of the period for offers to be accepted, i.e. around 17 July or 20 July. If they do not increase their bids, they must submit an envelope with their best offer to the CNMV. If Hispania’s offer is worse but the difference between its offer and Slim’s is less than 2%, then the Socimi in which George Soros holds a stake will have the option to match the offer made by its competitor.

Meanwhile, if the Mexican investor exceeds the number of shares held by FCC, it will have to launch a mandatory takeover for 100% of the company. And not at €0.58 per share, but at the fair price set by the CNMV.

Realia closed trading on Friday at €0.69 per share, up 0.7%.

Original story: Expansión (by C. Morán)

Translation: Carmel Drake

Spain’s CNMV Authorises Slim’s Takeover Of Realia

24 June 2015 – Expansión

The offer presented by the Mexican businessman was competing against a bid submitted at the end of 2014 by Hispania, the Socimi in which George Soros holds a stake.

According to reports yesterday from the market supervisor, Spain’s National Securities Market Commission (CNMV) has approved the public offer for the acquisition of shares (takeover or OPA) that Carlos Slim (pictured above) presented for 100% of Realia, valued at €178 million.

The body led by Elvira Rodríguez believes that the terms of the offer conform with ruling legislation and deems that the contents of the brochure explaining the operation are sufficient (following the latest submission of information by Slim on 16 June).

Slim offered €0.58 per share, compared with €0.49 per share offered by Hispania. Nevertheless, both prices fall below the current market value of the real estate company, which closed trading on Tuesday at €0.685 per share.

Carlos Slim has already taken control of Realia, since he recently bought the 24.9% stake that Bankia held; it used to be the second largest shareholder of the real estate company. The primary shareholder is FCC, and the Mexican businessman is, in turn, the primary shareholder of FCC.

Original story: Expansión (by E.P.)

Translation: Carmel Drake

Merlin & Testa: Birth Of A Giant With Assets Worth €5,500M

10 June 2015 – Expansión

For background to this story, refer to the article published yesterday: Sacyr Sells Its Subsidiary Testa To Merlin For €1,793M

(…)
The union of Testa and Merlin will create a giant, with assets worth almost €5,500 million; gross annual income of €290 million; and a market capitalisation that currently stands at €4,400 million.

Specifically, Merlin, the company led by Ismael Clemente and controlled by UBS, Marketfield and Gruss Capital, has a market capitalisation of €2,275 million and a real estate portfolio of €2,594 million, which covers a surface area of 680,000 m2 and generates annual income of €132 million.

Meanwhile, Testa is one of the leading real estate companies in Spain. It has a portfolio of real estate assets for rent, mainly in Madrid and Barcelona, which have a combined leasable surface area of 1,043,000 m2 and a value of €3,180 million. Its assets include one of the four skyscrapers at the northern end of the Paseo de la Castellana in Madrid, the Torre Sacyr (pictured above).

Merlin consolidates its position as the largest Socimi in Spain

Merlin Properties, which acknowledged its intention to invest in Testa’s share capital in April, has consolidated its position as the largest Socimi (listed real estate asset investment company) in Spain.

(…)

Phased sale until June 2016

The sale will be carried out in several phases and through an “accordion operation” over the next few months. The first phase was completed yesterday with a capital increase through which Merlin took a 25% stake in Testa’s share capital.

To this end, Testa undertook a €669.7 million capital decrease and distributed an extraordinary dividend of €527.7 million, through which Sacyr generated revenues of €238 million.

Thus, €1,793 million is the amount that results from adding the aforementioned €238 million to the €1,555 million that will correspond to the sale of the remaining 74.6% stake in Testa, which Sacyr owns following the capital increase. This operation will be executed “in successive tranches and phases, which will be completed before 30 June 2016”, according to reports by the company to Spain’s National Securities Market Commission (CNMV).

Once this acquisition has been completed, Merlin plans to make a public tender offer (OPA) for 100% of Testa’s shares. However, Sacyr has agreed to “irrevocably immobilise its shares in Testa and not participate in the process”.

Lazard has advised Sacyr in the deal and Morgan Stanley and Goldman Sachs have acted as financial advisors to Merlin.

Sacyr and Merlin’s share prices increase; Testa’s decreases

Sacyr, which is one of the best-performing securities on the Ibex so far this year, has received a boost from this operation – its shares were up by 4.3% yesterday, to €3.756 per share, leading the increases on the market. Investors also applauded the behaviour of Merlin Properties, whose shares increased by 1.58% to €11.54 per share.

Meanwhile, Testa returned to the stock market with a negative tone. By the end of the session, it had recorded a loss of almost 3%, to €13.15 per share, after the CNMV suspended trading of its shares between 12:00 and 15:00.

Original story: Expansión (by M.L.)

Translation: Carmel Drake

Blackstone, Merlin, Hispania & Eurosic Bid For Testa

11 May 2015 – Expansión

The US fund, the two Socimis and the French real estate company have all submitted bids for Sacyr’s subsidiary. The construction group is also considering other options, such as performing an IPO of 30% of Testa’s share capital.

Sacyr now has four proposals on the table for the purchase of its real estate subsidiary Testa. The Socimis Merlin Properties and Hispania, the US fund Blackstone and the French real estate company Eurosic have all submitted bids to acquire Sacyr’s subsidiary, which owns assets worth more than €3,100 million.

Sacyr engaged Lazard to organise a competitive process for the interested parties to bid for Testa. The deadline for proposals was Friday and in the end, four offers were received for the construction company chaired by Manuel Manrique.

Bids were invited for 30% of Testa, the stake that Sacyr had initially planned to place on the stock exchange (it currently controls 99.2% of the capital) as well as for the entire shareholding. In the end, Merlin, Hispania, Blackstone and Eurosic have all expressed interest in acquiring 100% of the real estate company, according to sources close to the process.

Proposals

Of the four candidates, only Merlin Properties had already formally expressed its interest in Testa. Now, the Socimi, which completed a capital increase amounting to more than €613 million last Thursay, has increased its bid to include 100% of the company.

The real estate company Hispania Activos Inmobiliarios has joined Merlin, the largest Socimi by market capitalisation. Hispania is owned by George Soros and John Paulson, and channels the majority of its investments through its Socimi Hispania Real. It has now fixed its gaze on Testa after trying to acquire one of the country’s other real estate companies, Realia.

Hispania, which is still waiting for a response from CNMV to the counter offer made by Carlos Slim to its bid for Realia, will now propose a similar transaction for Testa, whereby taking advantage of its access to funds from international investors.

Another one of the candidates is the French real estate company Eurosic. Last year, the company purchased Realia and Colonial’s shares in SiiC de Paris, for a total of €868 million. Now, it is looking to expand its portfolio of assets by backing the Spanish market, where the macroeconomic forecasts and the real estate environment point to an imminent rise in rental prices. Eurosic is participating in the process along with a foreign institutional fund.

Blackstone, the largest investment firm in the world, is behind the fourth proposal. This US fund has been investing in the Spanish real estate sector since 2013, when it acquired 1,860 rental homes from the Municipal Company for Housing and Land (Empresa Municipal de Vivienda y Suelo or EMVS) in Madrid. Moreover, Blackstone is the owner of four office buildings in Madrid and Barcelona, leased to companies such as Citibank and HP, as well as several logistics centres distributed across various locations.

The sale of 100% of Testa is just one of four scenarios that Sacyr is contemplating. As well as the possible sale of 100% of the company, the construction firm chaired by Manuel Manrique is also exploring the possible entry of a strategic partner to work together with Testa to realise the original plan of placing up to 30% of the company’s share capital on the stock exchange through an initial public offering (IPO).

Furthermore, Sacyr is evaluating a transaction that would have a much greater strategic impact and would involve the merger of Testa with another large real estate group. To that end, the company has begun preliminary conversations with Colonial to create the largest company in the sector in Spain and one of the largest in Europe.

On Saturday, Colonial said that “it would evaluate any invitation to participate in the eventual sale of Testa”. However, the group said that it is not “currently” studying any integration with Sacyr’s subsidiary.

In February, the construction company approved an “accordion operation”, where Testa regularised its finances with its parent company, subject to a capital increase of €500 million, which would allow the real estate company to strengthen its balance sheet. It is during this phase that the negotiations with Colonial would be addressed, according to sources close to the process.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake