AMSTERDAM France's Unibail Holding UNBP.PA has agreed to buy Dutch group Rodamco Europe RDMB.AS to create Europe's biggest listed property company, with 95 shopping centers in 14 countries, the two firms said on Tuesday.
Unibail will offer 0.53 of its common shares for each Rodamco common share -- a 15 percent premium to Friday's closing share prices. The offer period will begin in early May and close in early June.
The combined company, which is to be renamed, will have a market value of about 22 billion euros ($29.4 billion).
Rodamco shares rose 10.7 percent to 120 euros by 1017 GMT in Amsterdam, while Unibail shares fell 3.4 percent to 227.49 euros. According to the terms of the deal, that valued Rodamco at 120.57 euros per share, or 10.8 billion euros.
"It is difficult to call the deal cheap but you can see the long-term rationale," said Deutsche Bank analyst John Perry in London, citing a near-doubling in Unibail's development pipeline and the opportunity for it to expand out of France and into market leading positions.
Together, the 2 firms were the biggest owners of retail properties in Sweden, Spain, and the Netherlands, as well as in France.
In a webcast, Unibail Chief Executive Guillaume Poitrinal said the combined company will target a maximum 50 percent weighting in any one country and will be three-quarters invested in retail property. He said the plan was to pare back an initial 60 percent weighting in France by divesting office properties.
In March, Unibail and Goldman Sachs's Whitehall Fund sold the Coeur Defence office complex in Paris for a European record 2.1 billion euros.
Dutch broker Kempen said in a note that based on its estimates for 2008 and beyond, the Unibail-Rodamco share exchange would be dilutive on a net asset value basis.
"Although the transaction would provide longer-term growth potential for Unibail, we lower our rating on Unibail from Add to Neutral," Kempen said.
"MERGER OF EQUALS"
The two companies billed the offer as a "merger of equals."
Unibail's Poitrinal, who will lead the merged company, told a conference call there was a "perfect fit" with Rodamco as both companies had targeted the same quality of assets in the past 15 to 20 years.
While Rodamco Europe focused on retail properties and was diversified geographically, Unibail focused on France and was spread out across different sectors.
Rodamco Europe Chief Executive Maarten Hulshoff will leave the firm when the deal is completed with a severance package of 3 years salary plus pension benefits.
The companies said the merger would create significant synergies that should increase net rental income by 40 million euros to 65 million euros annually by 2012.
PGGM, Rodamco's largest shareholder with about 25 percent of the outstanding shares, has expressed its support, the companies said.
The supervisory and management boards of Rodamco supported the offer, with the exception of Terry Dornbush, who resigned from the supervisory board, Rodamco said.
According to the agreement, the merged company's registered office will be in Paris while its international headquarters will be in the Netherlands, where Poitrinal will be based. It will have its primary listing in Paris and a secondary listing in Amsterdam.
Other Dutch property stocks, such as Wereldhave (WEHA.AS) and Corio COR.AS, rose in the wake of the deal.
Shares in Britain's Hammerson (HMSO.L), which hit an all-time high last month on takeover speculation with Unibail touted by traders as one of various potential bidders, were up 0.12 percent at 1,709 pence.
"The rumors have not been completely put to bed by today's news," Perry said.
(Additional reporting by William Kemble-Diaz in London and Harro ten Wolde in Amsterdam)