Renta 4 | Yesterday, after the market close, Colonial announced in a statement to the National Securities Market Commission (CNMV) that the Boards of Directors of Colonial and SFL had approved the joint merger project between the two companies (with Colonial as the absorbing company). The intra-European cross-border merger will involve the extinction of SFL through its dissolution without liquidation and the transfer en bloc of all its assets to Colonial, which will acquire by universal succession all the assets, as well as the rights and obligations of SFL.
Remember that the exchange ratio has been set at 13 Colonial shares for each SFL share. In addition, an exit price of €77.50/SFL share has been determined (which will be adjusted according to the amount of the SFL dividend to be submitted for approval to the SFL General Meeting prior to the merger) for those SFL shareholders who decide to vote against the merger at the SFL AGM and exercise the corresponding share disposal mechanism in accordance with French law.
It should be remembered that last June 2021, Colonial increased its stake in SFL through a complex operation with the acquisition of 12.9% of SFL from Predica and the launch of a takeover bid. That operation, valued at just over €800 million and carried out at a discount of approximately 14% on SFL’s NAV/NTA, resulted in an increase in Colonial’s stake in SFL to the current 98.24%.
Assessment: Neutral impact news that will result in limited dilution, as the remaining 1.76% of SFL has an approximate market valuation of €50 million or €66.4 million according to the EPRA NTA of 2024 (€88/share). In accordance with the proposed exchange ratio and taking into account yesterday’s closing prices, Colonial acquired the remainder of SFL at an approximate discount of -18% vs EPRA NTA 2024.
For our part, we view the operation positively in that it makes sense from the point of view of simplifying the company’s corporate structure. Let’s not forget that Colonial has been SFL’s majority shareholder since 2004, with SFL remaining listed on the French market.
We reiterate our recommendation of OVERWEIGHT with a target price of €8.15 per share.
