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Letko Brosseau to Vote Against Gazit’s Offer for Atrium European Real Estate

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Letko, Brosseau & Associates Inc., (“Letko Brosseau”) exercises investment control or direction over approximately 2.71% of the outstanding shares of Atrium European Real Estate Limited (“Atrium” or the “Company”) and is the Company’s second largest shareholder.

On July 23, 2019, the Board of Directors announced an agreement with majority shareholder Gazit-Globe Ltd (“Gazit”) who owns approximately 60.1% of Atrium’s shares to acquire the remaining stake.

After diligently analyzing the recommended offer and engaging with concerned stakeholders including representatives of Gazit and Atrium, Letko Brosseau has unequivocally concluded that the proposed transaction is unacceptable to minority shareholders and will vote AGAINST the offer. The offer price of €3.75 per share heavily undervalues the Company and unduly benefits Gazit at the expense of minority investors.

Letko Brosseau’s rejection of the proposed offer is based on the following factors:

  • Significant discount of 25.7% to Atrium’s own reported EPRA Net Asset Value (NAV) per share of €5.05 as of June 30, 2019.
  • Atrium’s portfolio of high-quality shopping centres is predominantly situated in the best locations in Poland and Czech Republic, including over half of the assets in Warsaw and Prague. While Gazit’s offer implies a capitalization rate of 7.5%, the yields for prime shopping centres in Warsaw and Prague are 4.5%.1 2 Further, this valuation is in direct conflict with Atrium’s recent sale of two shopping centres in Poland for €298 million, representing a premium to book value and the purchase of Wars Sawa Junior retail centre in Warsaw for €301.5 million. This transaction is widely believed to have been executed at capitalization rate below 5%.
  • Termination of regular and special dividends €0.41 per share or 12.9% annual yield based on Atrium’s pre-acquisition share price of €3.17. The current offer price of €3.75 consists of a one-time special dividend of €0.60, offering an immaterial premium to the dividends historically paid to shareholders.
  • Immediately following the proposed acquisition announcement, Gazit’s share price appreciated by 11.7%, creating over €150 million in instant value for Gazit shareholders.

Finally, Atrium operates in some of the fastest-growing economies in Europe, with strong labour markets and consumption trends. Store-based retail sales are projected to grow at 4.2% annually in the next 5 years in Poland3 and 3.2% in 2020 in Czech Republic.4 Atrium has reported strong operational results including a high occupancy rate and net rental income growth. The balance sheet is in solid shape, with an investment-grade rating and low financing costs, making Atrium ideally positioned to execute on its significant development plans.

It is therefore Letko Brosseau’s position that Atrium should continue to create value for its shareholders and refrain from taking actions that unfairly prejudice the minority.

Letko, Brosseau & Associates Inc. is a Canadian independent investment manager founded in 1987. As of September 30, 2019, the firm manages approximately C$27 billion in assets for institutional investors and private clients. It has offices in Montreal, Toronto and Calgary.

Source : Press Release

(The story has been published from a wire feed without any modifications to the text)

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1 Comment

1 Comment

  1. Gopalan

    October 16, 2019 at 2:30 am

    Awesome ? ? good hark work pays it is dividend now.all the best ,pray God to give you all luck and success in your venture dashangopalan

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