UPDATE 1-Dutch NSI turns back home with VastNed approach

Mon Dec 13, 2010 6:45am EST

Related Topics

* NSI says offer pre dividend is at 9.7 pct premium

* Companies facing tough domestic office market

* VastNed shares up 6.2 pct, Nieuwe Steen down 4.5 pct

(Adds VastNed, NSI, analyst comments, details, shares)

By Aaron Gray-Block

AMSTERDAM, Dec 13 (Reuters) - Dutch real estate group Nieuwe Steen Investments (NSI) (NSTEc.AS) unveiled details of an all-share offer for VastNed Offices/Industrial VWNN.AS, a surprise move to deepen exposure to its troubled home market.

The deal, which NSI said was at a 9.7 percent premium to VastNed O/I's closing price on Friday, would mark a change in strategy, NSI having looked to Switzerland, France and Germany to expand abroad and build a portfolio of office and retail properties since Israeli investment group Habas bought a 21 percent stake in 2007.

Petercam analyst Stephan Van Weeren said he believed NSI had realised it was late into France, where office property yields were falling below acceptable levels for NSI, while Switzerland was expensive and it had struggled to get a sizeable portfolio in Germany.

Both VastNed O/I, worth about 220 million euros at Friday's closing price, and NSI are facing a tough domestic office market hit by oversupply, slow economic growth, a problematic demographic spread and a rising trend of flexible working.

NSI said the deal would create a company with 2.4 billion euros in assets and a balanced portfolio of high-yielding offices and retail space, while rental income would amount to more than 200 million euros.

It added the combined group would rebalance towards a 50-50 mix between retail and office properties, and the deal would provide annual synergies of at least 3.5 million euros.

"NSI looks forward to constructive and expeditious discussions with VastNed O/I going forward," NSI said.

VastNed O/I did not respond to requests for comment, but told news agency ANP it was surprised NSI had publicly detailed the proposed offer prior to talks on Monday. A spokesman for Habas was not immediately available.

Shares in VastNed O/I were up 6.2 percent at 12.28 euros at 1022 GMT, an almost eight-month high in a slightly positive Amsterdam market, while NSI shares fell 4.5 percent.

'DISCOUNT OFFER'

Detailing its offer late on Sunday, NSI said it was proposing an exchange ratio of 0.85 NSI share for every VastNed O/I share, valuing VastNed shares at 12.72 euros, a 9.7 percent premium to the closing price of 11.6 euros on Friday.

The final price would be 13.33 euros per share, including VastNed O/I's direct investment result of 0.61 euros per share for the nine months to Sept. 30, which it usually pays out as a dividend.

That would represent an exchange ratio 0.9, or a 15 percent premium to VastNed O/I's Friday's close, NSI said.

ING analyst Pieter van der Meijden said the offer price would be immediately accretive on a net asset value (NAV) basis for NSI, but was at a discount to the NAV of 16.36 euros reported by VastNed O/I on Sept. 30 at its nine-month results.

"I doubt VastNed Offices will accept the bid as it ... implies quite a large discount to NAV," Van der Meiden said.

He added VastNed O/I shareholders would likely realise the company was caught in a negative cycle and would not demand an offer price at NAV, but NSI might still have to sweeten its bid.

NSI, which has a market capitalisation of 650 million euros, said all assets and liabilities of VastNed would be transferred to NSI, and VastNed shareholders would receive new NSI shares, but it is still uncertain whether a deal will materialise. (Editing by Hans Peters and Will Waterman)

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