Israeli real estate company Aspen Group (TASE: ASGR) has undertaken a strategic move. The company today reported the signing of a non-binding memorandum of principles regarding cooperation with Teddy Sagi Group. As paret of the memorandum of principles, Sagi Group has agreed to invest in Aspen Group and its subsidiary Aspen BV, which coordinates its operations in Europe. As part of the cooperation between the parties, they will act to add value to Aspen BV and will promote a share offering on one of the European stock exchanges over the next 18 months.
In total, Sagi Group will invest and extend overall credit of NIS 610 million to Aspen Group and its subsidiary.
As part of the agreement, set out by the parties, it was agreed that Teddy Sagi Group will buy 5% of the capital of Aspen Group's shares, in a private allocation, at a price of NIS 12.10 per share and for an overall sum of about NIS 40.5 million. As of the close of the market yesterday, Aspen's share was being traded at NIS 8.70 per share, so that the deal entails a close to 40% premium on the market price.
Potential for real estate in the Netherlands
The deal reflects, in the estimation of both sides, the potential contained in Aspen BV's real estate assets, most of which are in the Netherlands. Dutch real estate activities have produced in the first nine months of 2021 NOI (net operational income) of NIS 71 million, and average occupancy in them of 96%.
According to the memorandum of principles, Aspen BV will allocate 24.99% of its shares to the Sagi Group. Against the purchase of the shares by the Sagi Group, Aspen will buy from Sagi a company holding two real estate assets in Romania worth an estimated NIS 210 million (about €60 million), which produces net annual rental income of about €4.2 million. In addition, the Sagi Group will be allocated options to increase its holding in Aspen BV by a further 15.01%, to a total of 40%, in exchange for injecting cash into Aspen BV. According to the current capital, this would mean injecting about NIS 180 million (about €50 million) and when exercising the option, Sagi Group will pay a premium of €3 million to Aspen Group.
As mentioned, the parties agreed that the shareholders agreement will include a commitment by Aspen BV and its shareholders to make maximum efforts to issue shares on a European stock exchange during a period of 18 month from the date of completing the deal, and that Sagi Group will extend it credit amounting to up to €50 million (about NIS 180 million) for agreements to buy future assets.
In total, Sagi Group will invest and extend credit for an overall amount of about NIS 610 million to Aspen Group and its subsidiary - about NIS 40 million in buying Aspen Group shares; NIS 210 million through transferring assets to the subsidiary; about NIs 180 million in credit and about NIS 180 million when exercising options to increase its holdings in the subsidiary.
The parties have also agreed that on the date of the deal's completion, Aspen Group will buy from Sagi Group a logistics center in Israel for NIS 66 million. This asset includes a 4,800 square meter logistics building on 12 dunam (3 acres) of private land with the remaining 4 dunam (1 acre) being available land. The annual revenue from its lease amounts to about NIS 3 million. The asset will be leased back to the group for a period of ten years.
Published by Globes, Israel business news - en.globes.co.il - on December 8, 2021.
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