(Updates with terms of FDR offer from sixth paragraph.)
July 27 (Bloomberg) -- Fonciere des Regions SA, a French real estate investment trust, made an offer for Fonciere Paris France SA that values the smaller REIT at as much as 440 million euros ($637 million) excluding assumed debt. The deal would give FDR a bigger share of Europe’s largest office market.
FDR agreed to exchange shares and debt with four sets of investors to give it a 37 percent stake in Fonciere Paris France, according to a statement today. FDR, based in Metz, will offer the same terms to buy the rest of the company.
Fonciere Paris France owns about 700 million euros of real estate in and around the French capital, which has the most office space in Europe. FDR made its bid as rents bottom out and leasing is beginning to pick up, Chief Executive Officer Christophe Kullmann said.
“This will have a positive impact on our results in 2012,” Kullmann said on a conference call today. Reiterating earlier statements, he said that profit excluding changes in asset values and one-time gains and losses, known as recurring net income, will rise “slightly” this year. Growth will accelerate by 3 percent to 5 percent in 2012, he said.
FDR fell 86 cents, or 1.2 percent, to 69.70 euros at 11:00 a.m. in Paris. Fonciere Paris France, based in the French capital, climbed 2.4 euros, or 2.2 percent, to 113.4 euros, giving the company a market value of 197 million euros.
The offer has been accepted by Fonciere Paris France’s managers, who are exchanging their shares alongside other investors, including insurers Predica and Groupe Covea. This first stage of the takeover is scheduled to take place in September, Kullmann said.
FDR will offer 13 of its shares for eight Fonciere Paris France shares. Bonds convertible into Fonciere Paris France shares will be exchangeable into shares or into FDR’s convertible bonds. Holders of Fonciere Paris France warrants will be able to convert 207 of them into eight FDR shares.
Recurring profit rose to 143.6 million euros, or 2.61 euros a share, in the first half from 139.3 million euros, or 2.75 euros, a year earlier, FDR said. The value of properties owned by FDR throughout last year, mostly offices in France and Italy, rose by 1.9 percent to 4.21 billion euros. Net asset value climbed to 81.5 euros a share from 80.8 euros six months earlier.
Net rental income fell 6 percent to 235 million euros as a result of disposals, FDR said. Excluding the impact of acquisitions and asset sales, rents rose 0.2 percent.
Changes in the value of the company’s assets added 91.4 million euros to profit. Net income totaled 315.1 million euros compared with 100.7 million euros a year earlier.
FDR’s assets includes stakes in Beni Stabili; Fonciere des Murs SA, a REIT specialized in sale and leasebacks; warehouse owner Fonciere Europe Logistique SCA; and Fonciere Developpement Logements SA, a residential investment trust. FDR also has a 12 percent holding in Altarea SA, France’s biggest out-of-town big box retail-park developer, and controls parking lot owner Parcs GFR.
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