UPDATE 1-Citycon, pension fund buy Swedish property for $695 mln

Wed Dec 19, 2012 9:20am EST

Related Topics

* Citycon and Canada pension fund to buy Kista Galleria from DNB

* Deal value $695 million euros

* Citycon shares fall on financing worries (Adds CEO and analyst's comments, share reaction)

HELSINKI, Dec 19 (Reuters) - Commercial property owner Citycon and a Canadian pension fund plan to buy a shopping centre in Stockholm for 526 million euros ($695 million), a move that will help the Finnish company expand in Sweden.

The two buyers will own Kista Galleria, the largest shopping centres in Stockholm area with annual sales of 280 million euros, in a 50-50 joint venture, they said on Wednesday.

The seller, DNB, is Norway's biggest bank.

"We are making a shift from very strong Finnish player with businesses abroad to a real Nordic player in the shopping centre industry," Citycon CEO Marcel Kokkeel said on a conference call.

But fears the deal would weigh on Citycon's finances sent its shares down 5.0 percent to 2.48 euros in afternoon trade.

"Citycon had a share issuance only in October, and now they have a hefty deal to finance. I think the valuation of the deal is pretty ok, but there might be some concern about their financing position as well as the fast pace of growth," said analyst Jesse Kinnunen from equity research firm Inderes.

About half of the deal will be jointly financed with an asset-backed loan. Citycon plans to pay the rest of its share from existing credit and cash, but it added it will consider issuing new equity.

Citycon currently owns 37 shopping centers and 40 other properties, valued around 2.7 billion euros. Canada Pension Plan Investment Board said the deal will help it expand its retail portfolio in Europe.

Shares in DNB, Norway's biggest bank, rose 1.5 percent by 1349 GMT.

The deal is expected to be closed in January. ($1 = 0.7568 euros) (Reporting by Jussi Rosendahl and Terhi Kinnunen; Editing by Ritsuko Ando)

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