Kardan NV (TASE: KRNV;AEX:KARD) is beginning 2011 with a plan to sell part of its eastern European development arm Globe Trade Centre SA (WSE:GTC) (GTC Poland) for NIS 1 billion. GTC Poland has a market cap of €1.4 billion, and its assets were valued at €2.4 billion at the end September, according to the company's last financial report.
Kardan's wholly-owned subsidiary GTC Real Estate Holding BV is offering 15% of GTC Poland to selected institutional investors, in order to increase GTC Poland's financial flexibility and enable it to pursue its business strategy.
Kardan executive and shareholder Eitan Rechter said, "We received offers for the sale, but implementing the measure depends on the price we're offered. We did not decide to sell at any price."
Rechter added that proceeds from a sale have not been designated for any specific purpose.
Kardan was apparently the first Israeli company to see the real estate and financial potential of Eastern Europe. Kardan controlling shareholder Yosef Grunfeld told "Globes", "In 1994, it was clear to us that the difference between East and West, which were connected until World War II, would not remain so wide given the geographic proximity. Although the communist regimes did not invest in luxuries, they invested heavily in education. This means that they do not lag culturally and educationally behind the West, so the growth environment in these countries was high."
In early 2004, ten years after founding GTC, Kardan reaped the fruit of its decision, floating GTC Poland on the Warsaw Stock Exchange (raising $86 million, at a company value of $431 million). The company's share price soared, reaching a peak market cap of $4.3 billion in April 2007.
Like other Israeli real estate companies operating in Eastern Europe, GTC Poland suffered from the repercussions of the economic crisis. By November 2008, the company's share price fell to a low point, reflecting a market cap of $800 million.
Now that some markets are showing signs of stability, GTC Poland's share price has recovered, and its market cap has doubled since January 2009, although it is still 60% below its peak. The share is included on the WSE 20 Index of the stock exchange's 20 largest companies.
Kardan currently owns 43.14% GTC Poland.
Kardan's share price rose 2.8% on the TASE today to NIS 22.89, giving a market cap of NIS 2.49 billion, and rose 1.2% in Amsterdam to €4.74. GTC Poland's share price fell 8.1% in Warsaw to 22.37 zlotys.
Published by Globes [online], Israel business news - www.globes-online.com - on January 19, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011