Lone Star gives GTC share issue a push

By bne IntelliNews March 30, 2015

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US fund Lone Star tempted investors in GTC on March 30 with a significant premium as it offered to buy out as much as 33% of the real estate company. The tender is part of a drive by the biggest single investor in the Warsaw-listed developer to push through an additional share issue that failed last year.

Lone Star, GTC's biggest stakeholder, offered a price of PLN6.1 (€1.5) per share, it said in a statement. GTC shares closed at PLN4.89 (€1.19) on March 27. The fund, which bought 32.5% in GTC in 2013, said it plans to boost its holding up to a maximum of 66%.

The announcement helped GTC stock, which has been under pressure for months, to climb 12.7% higher to PLN5.51 (€1.34) in afternoon trading on the Warsaw Stock Exchange.

Lone Star offered to pay PLN6.1 from May 18 to May 22. After that, investors can get PLN5.5 per share for the remainder of the public bid, which ends on June 3. The fund plans to keep GTC listed on the Warsaw bourse, it adds.

However, the offer will be effective if Lone Star reaches a 50.1% threshold. Therefore, the bid is a clear push for shareholders to approve a new rights issue at GTC, as the real estate company seeks capital to fund acquisitions. GTC announced on March 27 that it will renew its attempt to convince shareholders to agree to the issue of up to 140mn new shares at an AGM on April 23. Lone Star’s bid “gives an exit option” to shareholders that don’t back the plan, the fund said.

The management will decide on the price of issue, but it will not go below PLN4.2 (€1.02) per share. It would also have discretion to place any unsubscribed shares.  

"The company intends to invest the additional equity capital for the acquisition of value added, cash-generating assets, as well as for the construction of selected existing development projects," GTC CEO Thomas Kurzmann said in a statement released on March 30.

A previous effort to source the capital - while expanding outstanding stock by 43% - failed in October. Lone Star has led a major restructuring and took over management of GTC when it bought its stake in 2013. The property company has been weighed down over the last five years, with assets in Croatia and Romania doing the most damage.

However, GTC's new management insists it is now time to start making back its losses via opportunist acquisitions across CEE. Kurzmann says new investments will take place in major cities in Poland and capital cities in CEE and SEE including Warsaw, Bucharest, Budapest and Belgrade. GTC already has a number of "potential acquisition and development targets," he adds.

The low interest rate environment only makes the prospects more attractive he says. However, GTC may be running late in its quest. Ahead of the October vote, Kurzmann already warned that the company risks getting left behind in the chase for assets in the region. "People are starting to move," he told bne IntelliNews at the time, "and we must be involved in that."

Bank Pekao analysts note that shareholders might still be concerned over a new issue because "more stock in trading usually has a negative influence on price".  However, the bank also notes GTC stock has suffered through a major correction and should return to growth as soon as the company shows positive results.

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