STOCKHOLM (Reuters) - Nordic real estate firm SBB (SBBb.ST) has struck a deal to buy rival Hemfosa (HEMF.ST) for 23.5 billion crowns ($2.42 billion) in cash and shares to create a Nordic leader in public service properties such as schools and care homes.
The deal, announced on Friday, values each Hemfosa share at 126.15 crowns - a premium of 22.7% to the closing price on Thursday - and each Hemfosa preference share at 194.63 crowns.
Hemfosa’s board has recommended the offer to its shareholders.
SBB said the two companies’ property portfolios were complimentary, covering services such as schools, elderly care homes and municipal offices as well as a smaller number of private rental properties.
It said the deal would lead to synergies of around 300 million crowns per year.
“The combined company would have an attractive and stable property portfolio characterized by exposure to the Nordic welfare states with long term leases, high occupancy rates and a diversified tenant base,” SBB CEO Ilija Batljan said.
Put together, the group would have property with a book value of around 70 billion crowns and would be the fourth largest listed real estate firm in the Nordic region after Balder, Castellum and Fabege.
Shares in Hemfosa jumped 16.7% after the announcement to 120 crowns. Shares in SBB were down 3.3%.
The majority of properties owned by both firms are in Sweden, but the acquisition would also give SBB a wider geographical spread as Hemfosa owns significant property in Norway.
SBB said it would issue around 1.5 billion crowns in new shares as part of the acquisition plan.
If the purchase is completed, SBB will focus on reducing debt through a disposal program.
“SBB is highly committed to achieving a BBB+ (credit) rating in the next 12 months and material acquisitions will only be considered within the bounds of this,” the company said.
Reporting by Simon Johnson; Editing by Muralikumar Anantharaman and Mark Potter