France's FdR in talks to buy out Italian arm to create €15b office giant

French office-focused REIT Foncière des Régions said on Friday that it is contemplating a merger with its 52.4% owned Italian arm Beni Stabili as part of plans to expand in Europe.

FdR is offering 8.5 of its shares for every 1,000 Beni Stabili shares, representing an 8% premium to the three-month average share price on the day prior to the announcement.

In a statement, the company said that the deal would boost its earnings and have a slightly accretive impact of +1% on EPRA Earnings and NAV per share. Following the merger, FdR would seek to have its shares listed in Milan and Paris.

'Foncière des Régions intends to pursue discussions with Beni Stabili in order to review the terms and conditions of such potential merger,' FdR said. The merger, which would lift FdR's portfolio value to roughly €15 bn, would need backing from 75% of FdR's shareholders at an extraordinary general meeting slated for end-May. It is expected to complete by the end of 2018.

In conjunction with the offer, FdR plans to buy Beni Stabili shares on the market to reach a stake of just under 60%, the maximum shareholding allowed for a REIT to retain its tax efficient status.

New strategy
The operation is in line with FdR's strategic refocusing on offices in France and Italy, hotels in Europe and residential assets in Germany. It also reflects the group's efforts to simplify its organisational structure and make it more attractive for equity investors.

Under this strategy, FdR has recently sold nearly €290 mln of non-strategic retail assets in France. It has also taken its residential unit private as well as merged its two hotel units in one platform.

Italian business
With a portfolio of €3.5 bn, Beni Stabili is the largest office REIT in Italy. Based in Milan, the firm is active in real estate development and investment with its assets largely focused on its home city. Its development pipeline comprised €690 mln of assets in Milan at year-end 2017.

FdR said that the deal would be beneficial for Beni Stabili's shareholders, which would enjoy a 'significantly increased' liquidity and a higher dividend per share ratio as well as exposure to a more diversified portfolio.

The group added that it plans to adopt a new name in each country where it operates to better reflect its European footprint.

Consolidation wave
The move, which could create a European office property group with a market cap over €7 bn, is the latest sign of consolidation in the European listed property market.

Earlier this week Austrian firm Immofinanz announced it is finalising the purchase of a 29% stake in its smaller peer S Immo. Meanwhile Europe's largest listed real estate company Unibail-Rodamco is pressing ahead with plans to merge with Sydney-listed peer Westfield while Starwood Capital this week launched a bid for Austria's CA Immo. 

However, further consolidation in the European retail REIT sector ran aground last week after Hammerson announced it was withdrawing its recommendation for the takeover of its UK peer Intu. The move followed hard on the heels of Klepierre's aborted takeover for Hammerson on a stand-alone basis.



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