UPDATE 1-Klepierre to buy Corio, creating $13 bln property group

Tue Jul 29, 2014 5:43am EDT

Related Topics

* Klepierre to buy Corio for agreed 7.2 bln euros inc debt

* Offering 1.14 shares for each Corio share

* Savings seen at 60 mln euros (Adds quotes, details)

By Anthony Deutsch and James Regan

PARIS/ AMSTERDAM, July 29 (Reuters) - French shopping mall operator Klepierre is to buy Dutch group Corio for an agreed 7.2 billion euros ($9.7 billion) including debt, in a move which it said would create Europe's biggest pure-play retail property company.

Klepierre is offering 1.14 shares for each Corio share, implying a 15.6 percent premium on Corio's share price on Monday, the companies said in a joint statement. Shares in both stocks were suspended on Tuesday.

Klepierre will provide three out of four board members at the combined company, Laurent Morel, chairman of the executive board of Klepierre, told journalists on a conference call.

The deal will create a group with a stock market value of over 10 billion euros ($13 billion) and boost earnings from the first year, with potential combined savings of 60 million euros, the companies said.

The increased mall portfolio will help Klepierre compete with Unibail-Rodamco, another French-Dutch shopping mall operator which is currently Europe's biggest listed property company.

Klepierre, with a portfolio of 14 billion euros across 13 European countries, will expand by adding Corio's operations in Italy, the Netherlands, France, Germany, Spain, Portugal and Turkey. The Dutch company has 57 shopping centres, offering space to more than 5,000 retailers.

"We are building Europe's No. 1 pure player retail company," said Morel. "We are offering unique, exceptional portfolios of the leading shopping centers in Europe. Nobody can beat that."

With retail sales recovering slowly after years of decline across much of Europe, shopping mall operators are competing hard to attract fast growing brands such as fashion retailer Primark to generate revenue growth.

Morel expects large retail clients to be drawn by "the size of the portfolio, the location of the assets - all leading assets in major cities and regions in Europe."

After selling off roughly 4 billion euros in non-core assets over the past 2-1/2 years, Morel said the company would continue to divest businesses, but declined to give specifics.

Exane BNP Paribas said the deal was a good indication for continued corporate activity and consolidation in the European real estate sector.

"First, size seems to matter in retail," it said in a trading note. "We see operational and cost benefits to having a combined portfolio of 21 billion euros. Second, we believe that Corio is a good fit with Kl├ępierre, with a stronger portfolio in Italy and exposure to new countries such as Germany."

Corio was advised by Deutsche Bank and Goldman Sachs, while its main shareholder APG was advised by Morgan Stanley. Klepierre was advised by BNP and Lazard.

(1 US dollar = 0.7445 euro) (Additional reporting by Leigh Thomas; Editing by Andrew Callus and Mark Potter)

FILED UNDER: