Teleios Capital Partners LLC (“Teleios”), an investment adviser
to various funds which hold shares in Immofinanz AG (the“Company”
or “Immofinanz”), confirms that it has written a letter (“the
Letter”) to the Company’s supervisory board (the “Board”) to
express its serious concerns regarding recently reported
developments involving CA Immobilien Anlagen AG, O1 Group Limited
and affiliated concert parties (collectively “CA Immo”, or the
“Bidder Group”). The full text of the Letter can be found at
http://www.teleioscapital.com/doc/20150331_IIA_TeleiosLettertoBoard.pdf
On 16 March 2015, the Bidder Group announced its intention to
make a partial voluntary tender offer to Immofinanz shareholders to
acquire up to 150,893,280 bearer shares, corresponding to
approximately 15.0% of the Company’s issued share capital, at an
offer price of €2.80 per share (the “Tender Offer”). The Bidder
Group announced on 23rd March that it had already accumulated an
interest of 3.7% in the Company’s outstanding shares. This was
followed two days later by a statement from the Federal Competition
Agency that CA Immo intends to ultimately acquire a stake
representing at least 25% of the Company’s voting rights.
Igor Kuzniar, Managing Partner of Teleios said:
“We have reason to believe that numerous other Immofinanz
shareholders share these concerns, and that it is appropriate to
bring them to light in the public domain given their broad
significance and exceptional urgency.
In less than three weeks’ time, on 15 April 2015, the acceptance
period for the Tender Offer will end. If it succeeds, the Bidder
Group will have acquired a voting interest of 18.7%, in addition to
any further share purchases that it makes in the meantime. Further
share buybacks by Immofinanz, such as those announced on 26 March
2015, will further increase this percentage.
The Board publicly acknowledged in the motions document for the
Company’s EGM that if the Bidder Group succeeds in amassing such a
large interest, they will wield significant influence over the
Company, most likely to the point of exercising effective control.
Therefore through the Tender Offer, shareholders run the risk of
effectively ceding control of Immofinanz to CA Immo, without
receiving any commensurate control premium in return.
Furthermore, we believe that CA Immo’s longer term ambitions, as
a direct competitor of Immofinanz, are likely to diverge
significantly from those of other shareholders. For example,
through its augmented level of influence, CA Immo may be able to
block a future sale of the entire company to an international real
estate group that it considers a threat, despite such a transaction
being of demonstrable benefit to all other shareholders.
We therefore believe that the Tender Offer constitutes a
creeping takeover attempt which will deny shareholders the control
premium they deserve, and will introduce significant conflicts of
interest and governance issues so as to risk permanently impairing
the long term value of Immofinanz. With the Letter, we have called
on the Board to take urgent steps to ensure that these very
possible consequences do not transpire as a direct result of its
inaction.”
On 23 March 2015, the Board and management of Immofinanz
(“Management”) announced an intention to make a voluntary partial
public offer for the purchase of a minority interest of up to 29%
of the outstanding share capital in CA Immobilien Anlagen AG (the
“Counter-Offer”), the main constituent of the Bidder Group, in a
move that seemed to mirror the Tender Offer made by the Bidder
Group to Immofinanz’s own shareholders.
Igor Kuzniar, continued:
“We find the rationale for this action unclear: the case has not
been made for using over EUR 500 million of liquid Company funds to
acquire an illiquid minority stake which seems unlikely to confer
any strategic or operational benefit for the foreseeable future. If
the Board’s intention is to set the stage for a combination of the
two companies, then this ought to be approached in the context of a
fully-fledged offer process to ensure that a complete transaction
and the corresponding strategic and synergy benefits are secured
before Immofinanz becomes financially entrenched: the Counter-Offer
risks this entrenchment occurring in the absence of any subsequent
consolidation.
We feel that the Counter-Offer also risks exacerbating the
dilemma posed to Immofinanz shareholders by the Bidder Group’s
Tender Offer. As the logic behind the Counter-Offer has not been
spelled out to shareholders and the broader investment community,
we believe that the resulting concern and confusion will weigh on
the Company’s share price at this critical time, adding to the
perceived attractiveness of CA Immo’s Tender Offer valuation and
its likelihood of succeeding.
We interpret Management’s recommendation that shareholders
reject the Tender Offer from CA Immo, and its intention to reduce
the mandatory bid threshold to 15% of share capital, as indicative
that Management and the Board ultimately share our concern.
We believe that these measures alone, however, are insufficient
and unlikely to prevent the Tender Offer from succeeding. As the
Company’s shares currently trade below the offer price, individual
shareholders may well make the short-term choice to take advantage
of the limited upside that it represents without fully considering
the aggregate consequences of their actions. Lowering the mandatory
bid threshold will have limited effectiveness in this regard as it
would only come into effect following the Extraordinary General
Meeting on 17th April (the “EGM”), which occurs after the Tender
Offer period has concluded.
Similarly, we believe that the Counter-Offer lacks a clear
strategic foundation and will likely prove an ineffective
deterrent, so the corresponding motion for the impending EGM should
be withdrawn by the Board.”
In the Letter to the Board, Teleios expressed that it feels that
the Board has a fiduciary responsibility to ensure both that
shareholders are properly informed of the possible ramifications of
the Tender Offer, and that other strategic alternatives to maximise
shareholder value are given appropriate consideration. Teleios
suggested that such alternatives may include a partial or complete
sale of individual business units, a split-up or demerger plan, a
sale of the entire company to a trade buyer, or a take-private
scenario, or indeed forgoing any such transaction and retaining the
current group structure.
Igor Kuzniar, continued:
“We request that the Board undertake to formally evaluate these
and possibly other alternatives through a strategic review process,
with the objective of ultimately presenting shareholders with a
more compelling and substantiated proposition than its present
course, which risks by default ceding effective control to a
competitor for a consideration that we and the Board deem to be
wholly inadequate.
In performing this exercise, it would be appropriate for the
Board to be advised by an internationally recognised investment
bank, which we strongly feel should be mandated as soon as possible
before 15 April 2015, the final date of acceptance of the Tender
Offer. Every single day of inaction increases the risk that
shareholders, unaware of such deliberations, irrevocably tender
their shares. Accordingly, we would be grateful if the Board could
publicly confirm as soon as possible that it is supportive of
undertaking a strategic review, and which investment bank it
proposes to retain.”
It is important to emphasise that Teleios is not, at this stage,
calling upon the Board to initiate a break-up or sale or any other
restructuring of Immofinanz, as it believes that the information to
decide which of these alternatives appears best suited to protect
shareholder value has not yet been obtained. Teleios has merely
requested that the Board conducts an objective review, with
appropriate professional advice, of strategic options to preserve
and enhance shareholder value in the face of the imminent threat to
the Company’s independence that it believes the Tender Offer from
CA Immo may pose.
Camarco (PR advisors to Teleios Capital Partners)Ed
Gascoigne-Pees+44 (0)203 757 4984+44 (0)788 400
1949ed.gascoigne-pees@camarco.co.ukorHazel Stevenson+44 (0)203 757
4989+44 (0)798 600 9720hazel.stevenson@camarco.co.uk