February 28, 2018 / 3:29 PM / 24 days ago

Austria's Immofinanz ditches planned merger with rival CA Immo

VIENNA (Reuters) - Property firm Immofinanz (IMFI.VI) effectively abandoned its planned merger with CA Immo (CAIV.VI) on Wednesday following pressure from an activist investor, saying it is now considering selling its 26 percent stake in its Austrian rival.

FILE PHOTO: The logo of Austrian real estate group Immofinanz is pictured on top of the company's headquarters building in Vienna August 13, 2010. REUTERS/Heinz-Peter Bader/File Photo

The firms agreed in April 2016 to create one of the biggest real estate groups in central and eastern Europe, on condition that Immofinanz sold its Russia portfolio first.

This took until last November when they said merger talks would resume soon. However, activist investor Petrus Advisers, which says it holds less than 4 percent in both companies, intervened and called the proposed deal a waste of money.

Petrus said Immofinanz shares would potentially rise 40 percent if it bought CA Immo instead of merging with it.

On Tuesday, Petrus sent another letter to Immofinanz’s supervisory board, criticizing its management team and alleging it was responsible for the poor performance of its shares.

“The expected improvement in corporate indicators during the coming quarters should be incorporated as best as possible in potential future negotiations with CA Immo for the benefit of shareholders,” Immofinanz said in a statement.

“The possible merger of the two companies during the 2018 financial year is therefore no longer expected from the current point of view,” the group said, not excluding a renewal of merger talks in the future.

CA Immo posted full-year results for 2017 later on Wednesday that included a record net profit of 235 million euros and funds from operations above its guidance, saying it had had an “extremely successful year”.

The results were published ahead of schedule because they were significantly above market expectations, and there was no connection to Immofinanz’s announcement, a spokeswoman said.

    Immofinanz said it would now focus on creating value for its shareholders and evaluate further strategic options including “the possible profitable sale of the CA Immo investment”.

    The company said in a separate statement that it had extended the contract of its finance chief Stefan Schoenauer ahead of schedule until end-April 2021.

    CA Immo noted Immofinanz’s decision and said it will stick to its operational and strategic targets.

    Immofinanz shares had traded 1.7 percent lower to 1.94 euros at 1350 GMT. They traded at around 2 euros when the merger plan was announced in 2016.

    CA Immo shares gained 2.3 percent to 24.46 euros, having gained nearly 40 percent since April 2016. Immofinanz would generate around 614 million euros in proceeds if it sold its stake in CA Immo at Tuesday’s closing price.

    Reporting by Kirsti Knolle, Alexandra Schwarz-Goerlich and Francois Murphy; Editing by Alexander Smith

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