Financial Times

Dubai group makes Colonial offer

By Leslie Crawford in Madrid

Published: February 28 2008 03:23 | Last updated: February 28 2008 03:23

Investment Corporation of Dubai on Wednesday made a non-binding offer for Inmobiliaria Colonial that valued the troubled Spanish real estate group at just below €3bn ($4.5bn).Less than a year ago, Colonial’s market capitalisation was €9.5bn, but the international financial crisis has hit the market valuation of Spanish real estate groups. The subprime mortgage crisis in the US has also dried up funding for the sector.Colonial was effectively put on sale early this year because of big debts amassed by Colonial’s main shareholders, who increased their stakes in the company in an attempt to stave off the collapse of Colonial’s share price last year.

ICD has given Colonial’s two main shareholders – Luis Portillo, former chairman, and the Nozaleda family – 48 hours to accept its terms. Mr Portillo and the Nozaledas control 52 per cent of the company. ICD said it would make a full offer for Colonial once it had “at least 50.1 per cent” of the group.

Colonial’s share price fell 7.7 per cent to close at €1.57 as traders indicated they were not expecting a counter-offer. But the deal is far from done.

ICD, which groups the Dubai government’s commercial assets, said the offer was conditional on refinancing agreements being reached with four international banks that hold more than 90 per cent of Colonial’s €8bn debt.

Royal Bank of Scotland, Eurohypo, Calyon and Goldman Sachs last year arranged a €7.2bn syndicated credit to allow Colonial to acquire two other real estate groups in Spain. Goldman Sachs also financed Colonial’s 15 per cent stake in FCC, a Spanish construction group, which it acquired for €1.6bn. That stake is worth just above €800m today, which means Colonial is sitting on a capital loss on that investment.

Analysts said Goldman Sachs might resist the terms being offered by the Dubai group. Goldman could not be reached for comment on Wednesday.

The Dubai group is offering to pay for Colonial partly in cash and partly in its own bonds. ICD is offering €1.85 a share in cash, but the group said “at least 50 per cent of the price” would be paid in zero-coupon bonds worth €2.25 a share at redemption after four-and-a-half years.

If the deal goes ahead, Colonial would be the first major investment outside the United Arab Emirates for ICD.

Colonial took on a lot of debt last year to finance its expansion at the peak of Spain’s property boom. But the end of such boom has made it more difficult for Colonial to sell assets to repay its debts.


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