Spanish real estate concern Metrovacesa SA has launched a $7.35 billion bid to seize control of France’s largest real estate firm, Gecina. If shareholders accept the bid, Metrovacesa SA would become Europe’s biggest real estate firm with roughly $18.2 billion worth of assets and $1.8 billion in revenues.
Gecina, with its real estate assets concentrated around the Paris region, has a $7.3 billion market cap. By comparison, Metrovacesa has a market capitalization of $3.6 billion.
If approved, the deal would also represent the richest cross-border acquisition that Europe’s commercial property market has ever witnessed. Yet it won’t be the first time that a Spanish property group has bought a French concern. Last year, Metrovacesa’s Barcelona rival—Inmobiliara Colonial—acquired French property company Societe Foncie re Lyonais for $1.6 billion.
Gecina’s two largest stakeholders are French insurance companies. Those two firms — the French subsidiary of Allianz AG and GMF-Azur — sold initially sold a 30% stake of Gecina to Metrovacesa for $2.1 billion, or roughly $120.36 per share.
Metrovacesa chairman Joaquin Rivero claims that the acquisition will bolster commercial and residential property rentals rather than property development and sales, which already represent a growth center for the firm.
London’s Financial Times offered a decidedly lukewarm appraisal of the deal in a column today: “Metrovacesa's cash offer is not only generous but has a quixotic touch. It values [Gecina’s] equity at up to Euros 5.6bn [or $7.5 billion US] — or more than twice its own market capitalization. Given Metrovacesa's heavy debt load, the fact that it has secured a syndicated loan is a sign of desperation among its yield-starved lenders.”
The column goes on to argue that Gecina can cope with extra debt. But hugely-ambitious Metrovacesa “will need to speed up divestments at home. Most probably, it will also need to issue more equity than it intends - before Spanish property valuations nosedive.”
On Tuesday, ratings agency Standard & Poor's placed Gecina’s corporate credit ratings on CreditWatch with negative implications, following the takeover bid. An S & P statement adds, “a downgrade of several notches” is possible.
