Colonial shareholders, ICD may reopen bid talks

MADRID/LONDON (Reuters) - Colonial COL.MC shareholders and Investment Corporation of Dubai may restart takeover talks despite the lapsing of ICD's bid for the indebted Spanish property, they said on Tuesday, confirming what sources had told Reuters.

ICD said earlier it had not been able to reach an agreement with Colonial’s two main shareholders and that its offer had “expired” after a Monday night deadline.

Later, sources close to the deal told Reuters the stakeholders were still talking, prompting Spanish market regulator CNMV to suspend trading in Colonial shares and ask the shareholders and ICD to clarify the state of play.

Both sides replied that they were in contact about restarting the negotiations.

“ICD will probably modify the terms of its offer to the main shareholders so, at the moment, does not rule out the possibility that there could be a deal at some stage soon,” ICD said in a statement to the CNMV.

Former chairman Luis Portillo and the Nozar group, which together own 52 percent of Colonial, had previously agreed to sign up to any eventual bid, but bankers said they fiercely opposed the terms eventually put on the table.

ICD had offered 1.85 euros cash per share now or zero-coupon bonds that would be worth 2.25 euros a share when they mature in four and half years’ time, valuing the company at about 3.4 billion euros, just below its net asset value.

Colonial stock was down 5.7 percent at 1.16 euros when it was suspended, up from an earlier loss of nearly 14 percent.

Any deal with ICD, an $82 billion sovereign wealth fund, needs the backing of banks that have lent billions of euros both to Colonial and its major shareholders.

“The talks continue as creditors want to avoid the company filing for administration, practically the only way forward if a takeover deal fails,” said one banker who declined to be named.

One source close to the deal said the new talks could go on for another 48 hours.


Sources close to the deal said the previous talks tripped up on ICD’s request to renegotiate a syndicated loan and sell Colonial’s residential unit, which could affect the bid value.

Failure to reach a deal would leave creditors with a headache over what to do with Colonial and its related debt.

“There will be a lot of gnashing of teeth and sharp intakes of breath amongst the poor bankers sitting on 8.96 billion euros of debt,” a property analyst said on news that talks had lapsed.

Goldman Sachs GS.N, Royal Bank of Scotland RBS.L, Eurohypo AG EHYG.DE and Calyon CAGR.PA organized a 7.2 billion euro syndicated loan last year and are still sitting on much of it -- 1.5 billion euros for Goldman, according to a source familiar with the situation.

Bankers say a larger consortium of banks lent Portillo and Nozar almost 2 billion euros to buy Colonial shares before Spain’s sharp property market downturn, which forced them to unwind derivative positions, which then slammed the stock lower.

Those banks could end up taking on shares Portillo and Nozar put up as collateral or could try to renegotiate the debt, as covenants have been breached -- an unlikely option, given the credit crunch and sector outlook.

Creditor banks could also write down some of their debt, find another bidder, get involved in managing Colonial or try to take it into administration and restructure it to pay back debt.

Additional reporting by Sinead Cruise and Carlos Ruano; Writing by Ben Harding and Jane Barrett, editing by Will Waterman