Six weeks after Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL) signed a letter of intent to invest €40 million in Kardan NV (TASE: KRNV;AEX:KARD) unit Kardan Land China Ltd., Kardan announced that the talks have been called off. "The parties have decided to stop the process at this stage," said Kardan in a notice to the TASE.
The talks reportedly never reached an advanced stage, and Migdal, which was still reviewing the investment, decided against it.
In late December, Kardan NV announced a memorandum of understanding to bring in a partner into the business. Kardan Land China (formerly GTC China Real Estate), through an allotment 10%. Migdal was supposed to buy 10% of the company for RMB 333.3 million (€40 million), reflecting a company value of €403 million (NIS 2 billion) after money. The announcement came six years after Kardan launched its Chinese operations.
Over the past two years, Kardan, controlled by Joseph Greenfeld and Avi Shnur, has been trying to reduce its leverage. The company has real estate, motor vehicle, water infrastructures, financial services, and high tech interests. Its share price has fallen 53% in the past year, to give the company a market cap of less than NIS 1 billion. Its market cap at the end of 2007 was NIS 6.3 billion.
Kardan initiated its real estate business in China in 2005, and it currently has seven projects under various stages of development in second and third tier cities in the country. Kardan Land China focuses on building mixed commercial and residential projects, in which it owns 50%, and which have an aggregate built-up space of three million square meters.
Kardan Land China had assets of €488 million at the end of September 2011, and its shareholders' equity was €231 million. The company has already signed contracts for the sale of 6,100 apartments, which will generate a gross profit of €30 million.
Kardan Land China contributed a profit of €20 million to Kardan NV in January-September 2011, after it signed an agreement to sell 50% of its holding in the Galleria Chengdu mall at a profit of €12 million.
In the past year, Kardan NV has sold assets for more than NIS 2 billion, which helped boost its cash reserves and reduce its debts. Besides the Galleria Chengdu mall, subsidiary TBIF Financial Services BV sold its holding in Russia's Sovcom Bank for €123 million, and Kardan sold 16% of its Eastern Europe real estate subsidiary Globe Trade Centre SA (WSE:GTC) (GTC Poland) for €195 million. Kardan NV posted a net loss of €67 million in January-September 2011.
Kardan NV's share price fell 2% on the Euronext Amsterdam today to €1.74. Tuesday's closing share price on the TASE was NIS 8.51, giving a market cap of NIS 952 million. There is no trading on the Tel Aviv Stock Exchange (TASE), due to a strike.
Published by Globes [online], Israel business news - www.globes-online.com - on February 9, 2012
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