ADO Europe Ltd.'s (TASE: ADO) successful gamble on the German real estate market received official vindication yesterday in the form of a giant €415 million (NIS 1.7 billion) financing round through an IPO on the Frankfurt Stock Exchange by its ADO Properties subsidiary (Frankfurt: ADJ). The amount raised is likely to rise to €460 million (NIS 1.9 billion) soon if the underwriters for the offering exercise their green shoe option to buy more shares at the price for the offering.
The controlling shareholder in ADO, Shikun & Binui Holdings Ltd. (TASE: SKBN), controlled by Shari Arison, said that the flotation in Germany would yield it a NIS 120-130 million capital gain, an amount that could rise by 10% if the green shoe option is exercised. Shikun and Binui became the controlling shareholder in ADO in 2011, when it merged its activity in Germany into the company, controlled up until then by Adi Keizman. Shikun and Binui current holds 39% of ADO's shares, worth NIS 700 million. The other principal shareholders in ADO are foreign fund Stenham (17%), Harel Insurance Investments and Financial Services Ltd. (TASE: HARL) (14%), and The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5) (7%). Keizman still has a stake of almost 6%, worth NIS 100 million.
ADO Properties, which is responsible for all of ADO's business activity, owns 250 income-producing properties in Berlin, mostly residential, and is managed by CEO Rabin Savion. ADO said that the offering had been oversubscribed, with total demand reaching €890 million. UBS and Kempen led the flotation. The share price in the offering was €20, reflecting a €700 million market company value for ADO Properties (after the offering), and trading in the share began today. €215 million, more than half the amount raised in the flotation, went to the parent company, ADO, through an offering for sale. This amount could rise to €260 million if the green shoe option is exercised.
The remaining €200 million raised was retained by the subsidiary making the offering. Following the flotation, ADO's holdings in its subsidiary were diluted to 41%, and will drop to 35% if the green shoe option is exercised. The ADO share was down 4% on the TASE today, reflecting a NIS 1.7 billion market cap.
"The legislation in Berlin won't hurt us"
Ofer Kotler, chairman of ADO and ADO Properties, said today, "The offering is a tribute to ADO. The company is not a dream company; it owns real properties, but we still have to prove ourselves every day anew. Several dozen investors took place in the offering, with two thirds of them being long-term investment concerns." Kotler also mentioned the legislation concerning residential rent control in Berlin, which recently took effect in an attempt to prevent a further rise in rent in the city, where the pace of rent increase has been among the highest in Europe. "All in all, in the long term, we don't feel that the legislation will hurt us," Kotler said. "The base price of properties in Berlin is relatively low, and despite the restrictions, we still have a wide margin to raise prices."
Published by Globes [online], Israel business news - www.globes-online.com - on July 23, 2015
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