FL Group to buy Baugur Group property holdings

By Kristin Arna Bragadottir

REYKJAVIK, Dec 4 (Reuters) - Icelandic holding company FL Group FL.IC said on Tuesday it signed an agreement to buy the property assets of privately held Baugur Group in an all-stock deal worth 53.8 billion Iceland crowns ($873.7 million).

Separately, FL Group said Hannes Smarason had resigned as its chief executive and would be succeeded by Deputy CEO Jon Sigurdsson. Smarason will stay on the board.

The deal with Baugur -- part of a larger restructuring -- will see Baugur become FL Group's largest shareholder with a 35.9 percent stake.

Baugur, an Icelandic company that owns a string of British retailers and has said it may consider joining with Dubai-owned Landmark Group to bid for luxury department store Saks Inc (SKS.N), said selling the property portfolio would help it focus on its retail assets.

"This is a key part of Baugur's strategic development to concentrate on our retail portfolio and the international expansion that we announced earlier in the year," Baugur CEO Gunnar Sigurdsson said in a statement.

FL Group said the deal would raise its stake in Nordic property firm Landic Property to 39.8 percent and give it 32.3 percent of Fasteignafelag Islands, 49.7 percent of Thyrping, and 22.7 percent of Eik property company, along with holdings in a number of international property funds.

In exchange, FL Group will issue 3.7 billion new shares to Baugur at 14.7 Iceland crowns per share, well below the Dec. 3 closing price of 19.25 crowns.

"In light of the size of the share issue and current market conditions, FL Group's board of directors concluded that the issuance of new shares should be at a price lower than current market price," FL Group said.

The transaction is subject to the performance of due diligence and approval by shareholders at a meeting to be called later this month.

FL Group said it plans to offer 10 billion crowns worth of new equity to institutional investors and shareholders at the same price of 14.7 crowns per share. Baugur has pledged to sell up to 5 billion crowns of its FL Group stake if demand requires, which could push the offer to 15 billion crowns.

Shareholders will be offered stock through a 3 billion crown rights issue in proportion to their holdings at the start of the subscription period, FL Group said.

It also said it had signed a letter of intent with Landic Property under which Landic would acquire some of the property assets, chiefly the holdings in international property funds, in a deal valued at 13.7 billion crowns.

FL Group, which last month cut its stake in American Airlines parent AMR Corp (AMR.N) to 1.1 percent from 9.1 percent, said its European property portfolio will have total assets of 574 billion crowns after the transactions. ($1=61.58 Iceland Krona) (Reporting by Kristin Arna Bragadottir, writing by Sarah Edmonds; editing by John Wallace)