VIENNA (Reuters) - Austrian property group Immofinanz (IMFI.VI) agreed on Monday to sell its 26 percent stake in rival CA Immo (CAIV.VI) for $882 million to U.S. investor Starwood, drawing a line under a failed merger attempt.
Part of the proceeds will be used by Immofinanz to repurchase some of its own shares up to the 10 percent maximum allowed by the end of next year, lifting its stock as much as 3.6 percent.
CA Immo and Immofinanz had agreed in 2016 to merge and create a property heavyweight but the plan fell through this year after pressure from an activist investor.
Starwood had launched its own bid to buy up to 26 percent in CA Immo shortly after the merger plan fell through. Its original offer, roughly $84 million lower than the price it agreed to pay now, was rejected by shareholders last month.
The U.S. firm got a second chance when Immofinanz put its stake on the bloc.
“We see great potential in the Austrian, German and central and eastern European real estate markets,” said Starwood Chief Executive Barry Sternlicht.
With its “substantial capital resources and relevant experience” Starwood would support CA Immo management as a strategic anchor shareholder, he added.
Austria has three separately listed property companies, all with similar names — Immofinanz, CA Immo and S Immo (SIAG.VI).
The industry has been seen as ripe for consolidation since residential property firms Conwert and Buwog were taken over by German market leader Vonovia (VNAn.DE).
With CA Immo partnering with a U.S. investor, S Immo would be a natural takeover candidate for Immofinanz, said a trader.
“Even after the share buyback, there could be enough money left,” he said. S Immo shares rose as much as 3.8 percent on Monday.
Immofinanz had already agreed to buy 29 percent in S Immo, which in return has a 12 percent stake in Immofinanz.
CA Immo, whose management has to approve the sale, welcomed the news of the Starwood investment. Closing of the deal, which is subject to regulatory approval, is expected in the third quarter.
Immofinanz expects net proceeds from the sale of 507.9 million euros, putting the return on its 2016 CA Immo investment at roughly 30 percent.
“The share buyback is positive as it will boost Immofinanz’s key financial ratios,” said the trader. “The money from the stake sale will help them to get there.”
Immofinanz, which had over 500 million euros in cash end-March, needs around 200 million for the planned buyback based on the current share price.
Reporting by Kirsti Knolle; editing by Jason Neely/Keith Weir