European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

On 20 February, Bloomberg reported that real estate investor Aggregate Holdings is in conversations with CA Immo for a potential offer for the company, which could be partial, at a price of €36 per share.
On 26 February, SOF-11 Klimt CAI S.à r.l. <a href="https://www.prnewswire.co.uk/news-releases/sof-11-klimt-cai-s-a-r-l-bidco-a-controlled-affiliate-of-starwood-capital-group-announces-an-increase-of-the-offer-price-for-the-public-takeover-offer-of-ca-immobilien-anlagen-ag-ca-immo--851722416.html" target="_blank" rel="noopener">announced an increase in the offer price</a>, from €34.44 to €36.00 (cum dividend).
<ul>
<li>4.5% higher than its initial offer.</li>
<li>The offer price for each CA Immo convertible bond with nominal value of EUR 100,000 will be increased from approx. €132,621.35 to approx. €138,628.59</li>
</ul>
Now Starwood has outmaneuvered before Aggregate presents any offer, which will put some pressure on Aggregate for a significant improvement.
The improved offer of  €36.0 represents:
<div>
<ul style="list-style-type: disc;">
<li>1.13x P/ 2021e BV</li>
<li>95.3% deal value/consensus NAV, per share (assuming a NAV estimate per share of €37.79, source: S&amp;P MI).</li>
<li>c. 6.1% discount to diluted EPRA NAV (Q3 20).</li>
</ul>
</div>
Gross spread to the new offer price is 1.26%. Further upside could come from a competing offer. Reiterate LONG.

On 20 February, Bloomberg reported that real estate investor Aggregate Holdings is in conversations with CA Immo for a potential offer for the company, which could be partial, at a price of €36 per share.
On 26 February, SOF-11 Klimt CAI S.à r.l. announced an increase in the offer price, from €34.44 to €36.00 (cum dividend).

4.5% higher than its initial offer.
The offer price for each CA Immo convertible bond with nominal value of EUR 100,000 will be increased from approx. €132,621.35 to approx. €138,628.59

Now Starwood has outmaneuvered before Aggregate presents any offer, which will put some pressure on Aggregate for a significant improvement.
The improved offer of  €36.0 represents:


1.13x P/ 2021e BV
95.3% deal value/consensus NAV, per share (assuming a NAV estimate per share of €37.79, source: S&amp;P MI).
c. 6.1% discount to diluted EPRA NAV (Q3 20).


Gross spread to the new offer price is 1.26%. Further upside could come from a competing offer. Reiterate LONG.

CA Immo: Raised Offer, Aggregate's Potential Competing Offer

On 8 January, SOF-11 Klimt CAI S.à r.l., an affiliate of Starwood Capital, announced its intention to launch a takeover offer to acquire the remaining 70% of <a href="https://www.smartkarma.com/entities/ca-immobilien-anlagen-ag" target="_blank" data-smartkarma-citation="entities:22540:1" rel="noopener">Ca Immobilien Anlagen Ag (CAI AV)</a> it does not already own.
Consideration is €34.44, in cash, equivalent to CA Immo's undiluted EPRA NNNAV, with no minimum acceptance condition.
<ul>
<li>1.1x P/ 2021e BV, 25.8x deal value/est. FFO and 91.14% deal value/consensus NAV, per share (assuming a NAV estimate per share of €37.79, source: S&amp;P MI).</li>
<li>
10.2% discount to EPRA NAV.</li>
</ul>
Starwood is a bargain hunter and distressed investor, so it must see value at the offer price.
<ul>
<li>The offer price is 17.7% below the closing price of 14 February 2020, when the pandemic started to hit the markets.</li>
<li>Therefore Starwood is betting on the recovery of the German office market. CA Immo has prime buildings in Berlin, Munich, Frankfurt and other German cities, and a big land bank in Berlin.</li>
<li>CA Immo is planning to invest €710 million that should add c. 45 mn to FFO if all is occupied at a 6% gross yield on cost.</li>
</ul>
The shares have shot up by c. 14.6% vs last close and are trading at €35.30,
<ul>
<li>
c. 2.5% above the offer price.</li>
<li>Volume negotiated on 11 January is close to €40 mn.</li>
</ul>
The market is thinking of either a sweetened bid or that the company is now in play (again) and there could be another bidder.
<ul>
<li>I believe that the Board of CA Immo will press for a better offer, considering that the current offer from Starwood is below where the shares were trading in February (€41.85).</li>
<li>The 30% stake held by Starwood represents a barrier to any other bidder, plus there will be no minimum acceptance condition.</li>
</ul>
Considering the resilience of the German prime office sector, and the pipeline of CA Immo, an improved offer representing a 10% premium to current EPRA NNNAV could be justified, or €38.34 per share, 11% premium to the current bid, and c. 4% 21e FFO yield (Capital IQ).
<ul>
<li>On this basis, recommendation is LONG CA Immo, TP €38.34.</li>
<li>The downside is that Starwood does not improve its bid, but the share price should be supported by  FFO yield, in the absence of a worsening pandemic scenario.</li>
</ul>

On 8 January, SOF-11 Klimt CAI S.à r.l., an affiliate of Starwood Capital, announced its intention to launch a takeover offer to acquire the remaining 70% of Ca Immobilien Anlagen Ag (CAI AV) it does not already own.
Consideration is €34.44, in cash, equivalent to CA Immo's undiluted EPRA NNNAV, with no minimum acceptance condition.

1.1x P/ 2021e BV, 25.8x deal value/est. FFO and 91.14% deal value/consensus NAV, per share (assuming a NAV estimate per share of €37.79, source: S&amp;P MI).

10.2% discount to EPRA NAV.

Starwood is a bargain hunter and distressed investor, so it must see value at the offer price.

The offer price is 17.7% below the closing price of 14 February 2020, when the pandemic started to hit the markets.
Therefore Starwood is betting on the recovery of the German office market. CA Immo has prime buildings in Berlin, Munich, Frankfurt and other German cities, and a big land bank in Berlin.
CA Immo is planning to invest €710 million that should add c. 45 mn to FFO if all is occupied at a 6% gross yield on cost.

The shares have shot up by c. 14.6% vs last close and are trading at €35.30,


c. 2.5% above the offer price.
Volume negotiated on 11 January is close to €40 mn.

The market is thinking of either a sweetened bid or that the company is now in play (again) and there could be another bidder.

I believe that the Board of CA Immo will press for a better offer, considering that the current offer from Starwood is below where the shares were trading in February (€41.85).
The 30% stake held by Starwood represents a barrier to any other bidder, plus there will be no minimum acceptance condition.

Considering the resilience of the German prime office sector, and the pipeline of CA Immo, an improved offer representing a 10% premium to current EPRA NNNAV could be justified, or €38.34 per share, 11% premium to the current bid, and c. 4% 21e FFO yield (Capital IQ).

On this basis, recommendation is LONG CA Immo, TP €38.34.
The downside is that Starwood does not improve its bid, but the share price should be supported by  FFO yield, in the absence of a worsening pandemic scenario.


Austria

CA Immobilien Anlagen AG acquires, manages and develops real estate properties. The Company owns properties in Vienna and other Austrian cities.  CA invests in housing, office space, shopping centers, and other commercial properties.

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CA Immobilien Anlagen AG (CAI AV)

CA Immo: Raised Offer, Aggregate's Potential Competing Offer

Starwood has outmaneuvered before Aggregate presents any offer, which could result in further upside. Gross spread to the new offer price is 1.26%...

Jesus Rodriguez Aguilar

CA Immo - Starwood: Mandatory Offer

The Board should fight for a better offer given the resilience of German prime offices. A 10% premium to current EPRA NNNAV could be justified....

Jesus Rodriguez Aguilar

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