Swedish private equity firm Ratos and Lehman Brothers’ real estate business have failed in their efforts to privatise Swedish property group Tornet, falling ten per cent short of the 90 per cent required acceptance level for their SKr190 (E21.14) per share offer for the business.
The Ratos and Lehman joint offer, which valued the business at E543m, was approved by shareholders accounting for 81.4 per cent of Tornet’s share capital. Ratos confirmed this morning that it would invest E74m for its 40 per cent stake in LRT Acquisition, the bidding vehicle set up by Ratos and Lehman.
“We primarily invest in unlisted companies,” said Ratos CEO Arne Karlsson. “But the situation that has now arisen in Tornet – where we will be a principal owner of a listed company – is a type of investment that we have previously identified as feasible for us.'
At the time of the offer launch, Karlsson had been optimistic about receiving the required level of acceptance: “Before our offer, the all-time high paid for Tornet [shares] was SEK182 per share. 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.”
Karlsson said the reasons for not reaching the 90 per cent target were not clear, although shares held by private investors unaware of their holding in Tornet was a possibility. 'It is also possible that hedge funds may have held shares and were anticipating an improved offer. However, we were not contacted by any funds and so it remains speculation.'
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.
The acquisition of Tornet marks Ratos’s 25th investment since the private equity strategy was launched almost five years ago. Overall, Ratos has invested more than SKr8bn (E890m) within private equity during this period. “Ratos’s normal holding period is three to seven years. Achieving the values we anticipate for Tornet will involve a holding period for today’s investment at the longer end of this span,” said Karlsson.
The buyers were 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.