Dubai could bid for Spanish property firm

Madrid, London: Investment Corporation of Dubai (ICD), an $82 billion company whose holdings include Emirates airline, could make a full takeover bid for property firm Colonial, the Spanish company said on Thursday, possibly sparking a bid battle for the indebted firm.

ICD wants to buy stakes held by the Nozaleda family and former chairman Luis Portillo, who together own more than 52 per cent of Colonial.

ICD's move would mark its first major foray into overseas markets since the company was established in 2006 to invest profits from Dubai's airline, financial services and real estate operations. ICD is Dubai's biggest state investment agency.

It would also be the first foreign state holding company to invest in Spain since the slowdown hit the property sector last year after nine years of rocketing growth.

Colonial owns prime assets in Madrid and Barc-elona and in Paris via its holding in French property firm Societe Fonciere Lyonnaise.

Value

However, one analyst said its stake in Spanish builder FCC was overvalued and 1.3 billion euros worth of goodwill on the Colonial balance sheet had evaporated, effectively making its Spanish business almost worthless.

After a series of audacious takeovers at the height of Spain's decade-long bull run, Barcelona-based Colonial has been caught out by a sharp slowdown in Spanish property and the unwinding of derivative positions.

The stock has tumbled 48 per cent since the start of December, luring interest from General Electric and France's Gecina in recent weeks.

ICD said its approach was preliminary but "would be in the interests of all of Colonial's shareholders". Colonial said its board will discuss the approach.

Shares in Colonial, which has a market capitalisation of about 2.8 billion euros ($4.16 billion), had risen nearly five per cent to 1.69 euros by 1228 GMT.

Although Colonial has a net asset value of around 12 billion euros, the business is saddled with debts of almost nine billion.

The cost of servicing this debt will rise to one billion euros next year and four billion in 2012 analysts say.

"My guess is all the suitors are going to open the books and say, oh my God, I didn't realise what a mess this was," said a London-based European real estate securities manager.

Any shareholder which buys over 30 per cent of a Spanish company must subsequently bid for 100 per cent of the shares.

Colonial last week said it had opened its books to GE Real Estate Iberia, which has also approached the firm about making a possible takeover bid.

French group Gecina said last month that talks with Colonial had taken place but denied a report that it had offered creditor banks linked to Colonial a deal to buy its Spanish rival.

In the event of a successful bid, ICD would probably sell Colonial's majority stake in SFL, a low-geared firm owning prime Paris office space, and its 15 percent stake in FCC, one of Spain's biggest builders.