Tornet, a listed property firm, has received a bid from Lehman Brothers’ real estate arm and Swedish private equity firm Ratos.
The cash offer has been made at SEK190 per share and values the target at E543m. Expressing confidence that the bid would be accepted, Ratos chief executive Arne Karlsson said: “Before our offer, the all-time high paid for Tornet [shares] was SEK182 per share. Tornet management have been perceived as creating shareholder value by, among other things, quite aggressive share buy-backs. Most shareholders realise that there would be a great risk in turning down this offer and view it unlikely a higher competing bid will be presented.” The offer has already received 55 per cent shareholder support and requires 90 per cent to go through.
The buyers are being advised by Lehman Brothers, Lazard, Leimdörfer and FöreningsSparbanken. Banks providing debt for the transaction include Skandinaviska Enskilda Banken, FöreningsSparbanken, Svenska Handelsbanken, EuroHypo and Hypo Real Estate.
Ratos, which is taking a 40 per cent stake, was approached in late 2002 by LBREP (60 per cent), which was looking for to do a deal with a local co-investor. Although Ratos has not been involved in property deals before, Karlsson says it views the buyout as similar to its previous investments in plumbing and heating wholesaler Dahl and ventilation and construction profiles producer Lindab.
Tornet is one of Sweden’s largest listed property companies. It has a lettable area of around 2.8m square metres and a book value of approximately SEK19bn. Almost 97 per cent of the property holdings, measured as book value, are in Sweden and mainly concentrated in Sweden’s six largest cities. The properties are owned and managed by the subsidiaries ArosTornet, Malmstaden, MälarTornet, SkansTornet and Euro Tower.
“Tornet offers a regionally well diversified real estate portfolio as well as an interesting mix of industrial, commercial and residential real estate,” said Karlsson. “Together with a well managed organisation the Tornet real estate portfolio makes up a great platform which offers a large number of interesting opportunities to participate in a restructuring of the Swedish real estate market.”
There have been high expectations in the Swedish private equity market that public-to-privates could solve the deal flow problem that saw the value of buyouts in the country fall from E3bn in 2001 to E970m last year, according to figures from the University of Nottingham’s Centre for Management Buyout Research. But while a handful of deals have been completed, including the recent E159m buyout of kitchen equipment maker Hackman by Nordic Capital, PTPs have still not taken off.
“We see that activity in the M&A market has increased compared to the situation a year ago,” said Karlsson. “Whether this will increase the number of PTPs is hard to say. There are still a lot of companies that are a bit too expensive in my view.”