Property firms Immofinanz and CA Immo renew merger efforts

Austria's Immofinanz and CA Immo announced a fresh attempt to merge on Monday to create a property group offering retail and office buildings across central and eastern Europe.

As part of the deal, Immofinanz agreed to buy a 26 percent stake in CA Immo for 604 million euros ($681.6 million) from Russian-owned O1 Group Limited for 23.50 euros, representing a premium of 35 percent to Friday's closing price.

The company does not plan to make a takeover offer for CA Immo but had to buy the stake to prevent O1 Group, owned by Russia's Boris Mints, from blocking the deal, an Immofinanz spokeswoman said.

Previous attempts to combine the two property companies have failed, with a takeover battle last year marked by bitter public exchanges between the two group's former chief executives.

CA Immo is now led by Chief Executive Frank Nickel, while Oliver Schumy has the same role at Immofinanz. The division of top jobs in the merged company is yet to be defined.

Shares in CA Immo, whose portfolio is dominated by office properties in Germany and Austria, gained as much as 11.8 percent to 19.50 euros, its highest in nearly a decade. Immofinanz, which has greater exposure to the retail property market, added 1.3 percent to 0950 GMT.

The two companies both have market capitalizations of around $2 billion. Their merged portfolio would consist of around 75 percent office properties and 21 percent retail assets across 3.2 million square meters.

RUSSIAN PORTFOLIO

In a second step towards the envisaged merger, Immofinanz aims to demerge or sell its Russian portfolio, consisting of five Moscow shopping centers with a book value of around 1.2 billion euros -- a quarter of its book value.

The net asset value of the Russia portfolio is 500 million euros, Schumy said, adding he expects to announce details of the next steps in Russia in the second half of the year.

Immofinanz in February wrote down 400 million euros on its Russian assets and continues to offer rent reductions to tenants in Moscow because they would otherwise struggle to pay their rents in dollars amid a rouble slump.

The combined portfolio of the two companies, which are focused on the German, the Austrian and central eastern European markets, would be worth 6 billion euros with a project development pipeline of 2 billion euros.

Immofinanz said it would fund 200 million euros of the stake purchase price in cash, 300 million through the issuance of a convertible bond and 100 million via a bridge loan.

$1 = 0.8862 euros