Metrovacesa’s board of directors has unanimously rejected the partial takeover bid by Mexican investor Carlos Slim for 24% of the capital of the Spanish developer. The company explained this Monday, in a document sent to the CNMV, that according to a report commissioned from Bank of America, the price provided by the Mexican investor through FCC is insufficient. Slim offers 7.2 euros per share.
The report commissioned from Bank of America to assess whether the price that Slim is willing to pay is fair, clearly indicates that the consideration offered to shareholders is “inadequate from a financial point of view.”
Both Santander and BBVA, the main shareholders of Metrovacesa, rule out selling their shares to the Mexican tycoon, so the directors of both financial entities have joined the rest of the directors in rejecting an unsolicited takeover bid, which can be considered hostile.
The group Santander considers that the price of the offer “does not adequately reflect the intrinsic value of the Metrovacesa shares and that, as of today, it has no intention of accepting the offer with its shares”, 49.36% of the capital, was noted in the report, “although it reserves the right to review its intention if there is a change in circumstances”, is highlighted in the document sent to the CNMV.
Similarly, BBVA considers that the price of the offer “is not sufficiently attractive and, as of today, has no intention of accepting”, for which reason it will not sell the shares representing 20.85% of the capital.
The CNMV authorized the takeover bid at the end of last month. FCC’s real estate subsidiary announced in March its intention to present this offer at a price of 7.8 euros per share. However, a few weeks later, it reduced it to 7.2 euros, since Metrovacesa decided to pay a dividend of 0.6 euros per share. With this movement, FCC will be able to reach a maximum holding of 29.4% of Metrovacesa’s share capital, including the 5.4% of which it already owns, in an operation valued at 262 million.
Metrovacesa’s board, as required, analyzed FCC’s offer and hired BofA Securities as financial advisor and the firms Hogan Lovells International and Uría Menéndez.
The real estate company also reported that Bank of America has surveyed potential investors interested in Metrovacesa, both industrial and financial, and has contacted them to find out about any potential interest in competing offers, without obtaining any results so far. The promoter reveals that Slim contacts have been maintained with the aim of exploring the possibility of improving the amount of the bid and contacts have been promoted to look for potential investors interested in formulating a competing offer, without achieving results.
According to the takeover bid law, Slim has until Thursday to improve his price. That same date is the deadline for competing offers.
The rejection of the operation opens several unknowns. The first, if there will be enough minority shareholders to sell at the offered amount of 7.20 euros. The second, if the Aztec businessman, faced with the unanimous rejection of the council, will improve his offer. Shareholders have until June 14 to accept FCC’s proposal. This Monday, the titles of the promoter closed at 7.07 euros.
In addition, the board of directors stated that, regardless of the degree of acceptance of the takeover bid, Slim “in no case will the offer reach a shareholding that allows him to individually exercise control over Metrovacesa’s strategic or business decisions.”
The biggest problem in accepting these offers in the developer sector is the low price of this type of company with respect to the appraisal of its assets. Specifically, Metrovacesa has a portfolio with a net asset value (NAV) of almost 2,500 million, while its share price has plummeted by 1,070 million.
The board of Metrovacesa, in addition, keeps the ace up its sleeve to take measures once the offer ends, according to what it warns in the document sent to the regulator this Monday. It points out that if, as a result of the offer, the share does not have “an adequate trading frequency and stock market liquidity”, the board “will analyze the situation and adopt the decisions that are reasonable based on the circumstances and the decisions of the rest of shareholders”.
The company can handle several alternatives. On the one hand, that the current shareholders put part of their shares up for sale to increase the free-float of the society. On the other, to launch a capital increase, with the aim of increasing liquidity, as well as diluting the weight that FCC acquires in the shareholding, but also that of the rest of the shareholders. And you can also explore other options with a smaller effect, such as signing liquidity contracts.
In the event that the FCC bid succeeds, this company would reach up to 29.4%. This would cause the free-float of the company goes from the current 31% to barely 2%, since both Santander and BBVA have declared that they will not sell their titles.
The 12 directors of Metrovacesa have rejected the proposal and the six that have shares in the company, including the CEO Jorge Pérez de Leza, will not sell their shares (very minority in all cases).
Schedule for the takeover bid
Improvement of the offer. According to the takeover bid law, Slim has up to five calendar days before the acceptance period expires to improve the offer on Metrovacesa. This period ends on Thursday, June 9. That same date is the limit for competing takeover bids to appear. In the event that the Mexican tycoon fears that the acceptance of the offer will be less than expected after the setback of the council, he can extend the acceptance period up to 70 days. This began on May 31 and ends on June 14, being the minimum required by law, 14 days. Slim may increase it up to three calendar days before the end of the acceptance period. That is, before June 11.