TIDMSPNV
RNS Number : 0609V
Spazio Investment NV
03 July 2009
RNS
Spazio Investment N.V.
3 July 2009
Press Announcement for immediate release
RESPONSE TO OFFER
On 19 June 2009, Terra European Investments B.V. ("TEI"), a vehicle controlled
and managed by Laxey Partners Limited ("Laxey"), posted an Offer Document to
Spazio Shareholders setting out the terms of a cash offer at EUR4.50 per Ordinary
Share (the "Offer").
Having carefully considered the terms of the Offer,
the Committee recommends that Shareholders reject the Offer. The text of a
letter from the Chairman of the Committee to the Company's Shareholders setting
out in detail why the Committee recommends that Shareholders should reject the
Offer is set out below.
Further announcements will be made as
appropriate.
A copy of the letter from the Chairman will be made
available on the website of the Company, www.spazioinvestment.com.
Spazio
is not subject to the City Code on Takeovers and Mergers or to the Dutch rules
for public offers in listed companies.
In accordance with the Company's
Articles of Association, the Company confirms that is has 27,491,295 ordinary
shares of EUR0.20 in issue and admitted to trading on AIM, a market operated by
the London Stock Exchange, under the ISIN code of NL0000686319. 4,545,448
ordinary shares are currently held in Treasury by the Company, and are expected
to be cancelled on or around 6 July 2009.
+-------------------------------------------------------+------------------------------------------------+
| Enquiries | |
| | |
+-------------------------------------------------------+------------------------------------------------+
| Spazio Investment N.V. | +44 (0) 7802 244 033 |
| John Duggan | |
+-------------------------------------------------------+------------------------------------------------+
| | |
+-------------------------------------------------------+------------------------------------------------+
| Deutsche Bank - Nominated Adviser and Financial | +44 20 7545 8000 |
| Adviser | |
+-------------------------------------------------------+------------------------------------------------+
| Ben Lawrence |
| Situl Jobanputra |
+--------------------------------------------------------------------------------------------------------+
| | |
+-------------------------------------------------------+------------------------------------------------+
| Oriel Securities - Joint Broker | +44 20 7710 7600 |
| Richard Crawley | |
+-------------------------------------------------------+------------------------------------------------+
| | |
+-------------------------------------------------------+------------------------------------------------+
| Brunswick Group LLP | +44 20 7404 5959 |
| Richard Jacques | |
+-------------------------------------------------------+------------------------------------------------+
Deutsche Bank AG is authorised under German Banking Law (competent authority:
BaFin - Federal Financial Supervisory Authority) and authorised and subject to
limited regulation by the Financial Services Authority. Details about the extent
of Deutsche Bank AG's authorisation and regulation by the Financial Services
Authority are available on request. Deutsche Bank AG is acting as Nominated
Adviser and Financial Adviser to Spazio and no-one else in connection with the
contents of this announcement and will not be responsible to anyone other than
Spazio for providing the protections afforded to the clients of Deutsche Bank AG
nor for providing advice in relation to any matter referred to herein.
Oriel Securities, which is authorised and regulated by the Financial Services
Authority in the United Kingdom, is acting as joint broker to Spazio and no one
else in connection with the contents of this announcement and will not be
responsible to anyone other than Spazio for providing the protections afforded
to clients of Oriel Securities or for providing advice in relation to any matter
referred to herein.
LETTER FROM THE CHAIRMAN OF THE COMMITTEE
SPAZIO INVESTMENT N.V.
(Incorporated and registered in the Netherlands, No. 34237136)
+-----------------------------------------------+------------------------------+
| Independent Directors: | Registered Office: |
| John Duggan (Chairman) | Royal Damcenter |
| Roy Dantzic (Independent) | Dam 7f, 1012JS |
| Richard Mully (Independent) | Amsterdam |
| (together, the "Committee") | The Netherlands |
| | |
+-----------------------------------------------+------------------------------+
| | 3 July 2009 |
+-----------------------------------------------+------------------------------+
To Spazio Shareholders
Introduction
On 19 June 2009, Terra European Investments B.V. ("TEI"), a vehicle controlled
and managed by Laxey Partners Limited ("Laxey"), posted an Offer Document to
Spazio Shareholders setting out the terms of a cash offer at EUR4.50 per Ordinary
Share (the "Offer").
On the same day, the Company made an announcement in which the Committee advised
Spazio Shareholders to take no action in respect of the Offer. Having carefully
considered the terms of the Offer, a summary of which are set out in Appendix
I, the Committee recommends that you reject the Offer for the following reasons:
* the Offer significantly undervalues the Company;
* the Offer does not include any premium for control;
* the Accelerated Business Plan is expected to deliver significant returns to
Shareholders over the medium term; and
* Laxey has endorsed the Accelerated Business Plan and the Company already has a
clear focus on the disposal process and the return of capital to Shareholders.
In view of the above, the Committee considers that the Offer significantly
undervalues the Company and the Committee recommends that the
Shareholders should therefore reject the Offer.
This letter also provides an update on:
* the execution of the Accelerated Business Plan;
* the open market value ("OMV") of the Company's real estate assets; and
* the Company's position against its financial covenants.
+-------+----------------------------------------------------------------------+
| 1. | Reasons to reject the Offer |
+-------+----------------------------------------------------------------------+
| 1.1 | Significant undervaluation of Spazio's Ordinary Shares |
+-------+----------------------------------------------------------------------+
The Committee believes the Offer significantly undervalues Spazio's Ordinary
Shares with the Offer Price of EUR4.50 representing a discount of:
* 66.9 per cent. to the Adjusted NAV of EUR13.601 as at 31 December 2008; and
* 70.0 per cent. to the Pro Forma Adjusted NAV of EUR14.812 as at 31 December 2008.
The Pro Forma Adjusted NAV of EUR14.81 is approximately 3.3x the Offer Price.
The Committee believes the net asset value of the Company is underpinned by a
robust investment portfolio. The investment portfolio generates attractive
rental income from high quality assets which are let to tenants with good credit
profiles on long leases. Currently, occupancy levels are at approximately 96 per
cent.
As explained in more detail in Section 3 below, the Committee considers that the
unique features of the Fund's investment portfolio mean that its asset
valuations are expected to remain resilient.
+-------+----------------------------------------------------------------------+
| 1.2 | No premium for control |
+-------+----------------------------------------------------------------------+
TEI is seeking to gain control of Spazio without paying a control premium. The
Offer Price represents a premium of only 13.2 per cent. to the Closing Price of
EUR3.975 per Spazio Ordinary Share on 5 June 2009, the business day before Spazio
announced that it had received a firm intention to make an offer from TEI.
+-------+----------------------------------------------------------------------+
| 1.3 | The Accelerated Business Plan is expected to deliver significant |
| | returns to Shareholders over the medium term |
+-------+----------------------------------------------------------------------+
In light of challenging market conditions, the Offer and progress made on
disposals in H1 2009, the Committee has reviewed the Accelerated Business Plan
with the Fund Manager. The Committee now anticipates that the asset disposal
process will be extended by up to twelve months. Despite this prudent view, the
Committee reaffirms that there will be no let-up in the activity of the Fund
Manager in the execution of the Accelerated Business Plan. Further details
regarding the Accelerated Business Plan are set out in Section 2 below.
The Committee believes that over the medium term, higher returns will be
available to Shareholders from the cash generated by the Accelerated Business
Plan than those achieved through accepting the Offer, notwithstanding potential
delays in completing asset disposals.
+------+-----------------------------------------------------------------------+
| 1.4 | Laxey has endorsed the Accelerated Business Plan |
+------+-----------------------------------------------------------------------+
Laxey's Offer endorses the Accelerated Business Plan and Laxey's proposals for
the business do not represent a significant change to the Company's existing
strategy.
As Shareholders may already be aware, Laxey participates in the management of
Spazio through its Board representative, Nicholas James, who was appointed as a
non-executive director on 9 December 2008. Irrespective of the outcome of the
Offer, the Board intends to continue to work with Laxey and all Shareholders to
maximise Shareholder returns.
The Committee notes that Laxey intends to accelerate the disposal process. The
Company remains fully committed to generating cash returns for its Shareholders
as quickly as possible and will discuss with Laxey any proposal by which the
acceleration of the disposal process can be achieved for the benefit of all
Shareholders.
+-------+----------------------------------------------------------------------+
| 2. | UPDATE ON THE ACCELERATED BUSINESS PLAN |
+-------+----------------------------------------------------------------------+
| 2.1 | Overview of the Accelerated Business Plan |
+-------+----------------------------------------------------------------------+
In the second half of 2008, Spazio undertook a review of its business plan, with
the intention of maximising value and cash returns to Shareholders.
Shareholders, including Laxey, approved the terms of the Accelerated Business
Plan at an extraordinary general meeting held on 9 December 2008. In
summary, Shareholders approved the following:
* targeting the disposal of EUR450 million of assets over the period from 1 January
2008 to 31 December 2010, with further disposals planned beyond that date;
* suspension of acquisition and further development activities;
* the return of excess capital to Shareholders; and
* revised arrangements with the Fund Manager in order to align the interests of
the Fund Manager with those of Shareholders and to properly incentivise the Fund
Manager to deliver the Accelerated Business Plan.
The Fund Manager completed EUR63.9 million of disposals in the year ended 31
December 2008. The Company also completed a EUR25.0 million tender offer in
January 2009, demonstrating the commitment of the Company to return cash to
Shareholders.
+-------+----------------------------------------------------------------------+
| 2.2 | H1 2009 disposals |
+-------+----------------------------------------------------------------------+
As disclosed in the Chairman's statement accompanying the 2008 Financial
Statements, the Fund Manager was at that time in advanced negotiations to
complete approximately EUR80 million of disposals in H1 2009. This was against a
target of approximately EUR60 million of disposals for H1 2009 under the
Accelerated Business Plan.
The Fund Manager completed EUR13.3 million of disposals in H1 2009, comprising
fourteen investment property assets and five development assets as follows:
* 14 Telecom Italia assets located throughout Italy were disposed for EUR10 million,
at an average exit yield of 6.3 per cent., representing a 1.6 per cent. discount
to OMV as at 31 December 2008;
* 4 units at Edificio 16 were disposed for EUR2.9 million, at an average premium of
28.9 per cent. to historical cost as at 31 December 2008; and
* 1 unit at Eastgate Park was disposed for EUR0.4 million, at a small premium to
historical cost as at 31 December 2008.
As disclosed in the 2008 Financial Statements, Spazio had also accepted an offer
in respect of four properties let to Prada S.p.A for a purchase price of EUR54.5
million. However, due to the inability of the purchaser to perform its
contractual obligations, this transaction did not complete.
+------+-----------------------------------------------------------------------+
| 2.3 | Accelerated Business Plan for the period from 1 July 2009 |
+------+-----------------------------------------------------------------------+
The Fund Manager expects that market conditions for disposals will remain
challenging in H2 2009 with a slow recovery in 2010. As a result, the Committee
now anticipates that the asset disposal process will be extended by up to twelve
months.
The Committee believes that it will continue to be possible, particularly in
relation to the Company's Telecom Italia assets, to dispose of assets either in
single lots or small portfolio transactions at or close to OMV.
The Fund Manager continues to see demand, particularly from local purchasers,
for the attractive and secure returns generated by rental income from this type
of asset. The Company benefits from the geographic distribution of its
assets, which increases the number of potential purchasers, as well as the
limited availability of similar high quality assets in the Italian market.
However, the Committee recognises that in order to execute the Accelerated
Business Plan, it will also need to complete larger disposals which are likely
to be more difficult to execute in the near term. Although there is some
evidence to suggest that there is increased interest from buyers of larger
portfolios in the Italian market, such buyers are expected to require more
significant discounts to OMV and, because of their size, these transactions are
expected to take longer to complete.
The Fund Manager is currently in advanced negotiations in relation to the sale
of a further 53 assets, comprising 46 investment property assets and 7
development property units at Edificio 16. These disposals are all scheduled for
completion by 31 December 2009 and are expected to realise approximately
EUR32 million of gross sales proceeds.
Beyond these expected disposals, the Fund Manager has given instructions to sell
a significant number of other assets, targeting aggregate disposal proceeds of
EUR350 million.
As market conditions allow, the Fund Manager will advance the disposal of these
assets. The Fund Manager will continue to identify further assets for disposal,
and the Company plans to continue making significant disposals beyond 31
December 2010.
The Committee and the Fund Manager remain wholly committed to executing the
Accelerated Business Plan and delivering value for all Shareholders. The
Committee believes that the Fund Manager is best placed to deliver the
Accelerated Business Plan described above, due to:
* the Fund Manager's extensive local knowledge and significant experience in the
Italian light industrial real estate sector. Pirelli RE's extensive network of
approximately 200 affiliates/franchisees throughout Italy provide a strong
platform to execute a demanding disposal programme in challenging market
conditions;
* the Management Team who are responsible for the disposal process. The Management
Team comprises fourteen experienced real estate professionals, all of whom are
actively focused on executing the Accelerated Business Plan. This team is led by
Alberto Iori, who has over 17 years of experience in the light industrial and
logistics real estate sectors; and
* the Fund Manager's fee arrangements, which incentivise the Fund Manager to
maximise disposal proceeds in the period to 31 December 2010 and then again in
the period to 31 December 2011.
+------+-----------------------------------------------------------------------+
| 2.4 | Generation of cash returns from the Accelerated Business Plan |
+------+-----------------------------------------------------------------------+
The Accelerated Business Plan is still expected to generate significant cash
returns for Shareholders over the medium term.
As at 31 March 2009, the OMV of the Company's real estate assets amounted to
EUR725.1 million and, as described in detail in Appendix II, on a pro forma basis
the Company's adjusted net asset value as at 31 December 2008 was EUR339.9
million. As the Company disposes of its real estate assets, the Company's
financing agreements require that, on average, approximately 63 per cent. of net
cash proceeds from disposals are used to pay down the facility under which each
individual asset has been financed, whilst amounts remain drawn on the facility.
The remaining 37 per cent. of net cash proceeds are held as 'free cash' by the
Fund and are ultimately available for distribution to Shareholders.
The price at which disposals are completed relative to OMV impacts the level of
cash available for distribution to Shareholders. However, as shown in Table 1
below, even if asset disposals take place at material discounts to
OMV, significant value can still be generated for Shareholders.
Table 13: ILLUSTRATIVE ANALYSIS OF THE IMPACT OF DECLINES
IN OMV ON PRO FORMA
ADJUSTED NAV4
+--------------+------------+-----------+-----------+-----------+-----------+-----------+
| | Illustrative decline in OMV5 of investment properties |
+--------------+------------------------------------------------------------------------+
|Illustrative | | (0%) | (5%) | (10%) | (15%) | (20%) |
| decline in | | | | | | |
| OMV5 | | | | | | |
| of | | | | | | |
| development | | | | | | |
| properties | | | | | | |
+ +------------+-----------+-----------+-----------+-----------+-----------+
| | (0%) | EUR14.8 | EUR13.5 | EUR12.1 | EUR10.7 | EUR9.4 |
+ +------------+-----------+-----------+-----------+-----------+-----------+
| | (5%) | EUR14.6 | EUR13.2 | EUR11.9 | EUR10.5 | EUR9.2 |
+ +------------+-----------+-----------+-----------+-----------+-----------+
| | (10%) | EUR14.4 | EUR13.0 | EUR11.7 | EUR10.3 | EUR8.9 |
+ +------------+-----------+-----------+-----------+-----------+-----------+
| | (15%) | EUR14.1 | EUR12.8 | EUR11.4 | EUR10.1 | EUR8.7 |
+ +------------+-----------+-----------+-----------+-----------+-----------+
| | (20%) | EUR13.9 | EUR12.6 | EUR11.2 | EUR9.9 | EUR8.5 |
+--------------+------------+-----------+-----------+-----------+-----------+-----------+
Table 1 illustrates the impact of a range of declines in OMV of both investment
properties and the development portfolio from 31 March 2009 on the Pro Forma
Adjusted NAV of EUR14.81 per Spazio Ordinary Share as at 31 December 2008.
On the same basis of calculation, an approximate 33 per cent. decline in the OMV
of the entire Portfolio from 31 March 2009 would result in a Pro Forma Adjusted
NAV as at 31 December 2008 of EUR4.50.
For illustrative purposes only, a realisation of value per Ordinary Share
greater than EUR8.70 by 31 December 2011 would deliver an IRR in excess of 30 per
cent. from the purchase of an Ordinary Share at a cost of EUR4.50 on 30 June 2009.
+------+-----------------------------------------------------------------------+
| 3. | Update on OMV of real estate assets |
+------+-----------------------------------------------------------------------+
The Company's independent valuer, CBRE, values the Company's property portfolio
on a quarterly basis. The most recent quarterly valuation was as at 31 March
2009.
Total portfolio OMV as at 31 March 2009 was EUR725.1 million, which represents a
decline of 0.25 per cent. in asset values from 31 December 2008 on a
like-for-like basis (excluding the impact of sales and capital expenditure
completed during the period). OMV as at 31 March 2009 consisted of EUR623.3
million of investment property and EUR101.8 million of development property.
The decline in OMV of the investment portfolio in the three months ending 31
March 2009 was limited to 0.33 per cent. (net of disposals completed in Q1
2009).
The valuation of the Portfolio remained robust in the first quarter of 2009
despite challenging market conditions, reflecting:
* the high quality of the investment portfolio. Assets in the investment portfolio
are let to tenants with strong credit profiles on long leases. Occupancy levels
in the investment portfolio are high at 96 per cent.; and
* current transaction evidence, although limited, in the Italian light industrial
real estate sector, supporting the valuation as at 31 March 2009.
The Italian real estate sector did not experience the elevated levels of yield
compression that occurred in other Western European markets in the period to mid
2007. In consequence, the level of overall decline in the value of the Italian
real estate market has been, and is expected to remain, less severe than
elsewhere.
The Committee has discussed with CBRE the likely movement in asset valuations
between 31 March 2009 and 30 June 2009 and is of the opinion that there has not
been a material variation in OMV over that period.
Further modest declines in value are expected in the industrial real estate
sector in Italy in the short to medium term.
Although valuations of the investment assets are expected to remain relatively
stable, the ongoing limited availability of credit is expected to keep
investment activity at a subdued level. Some transactions, particularly in
larger lot sizes, may therefore take place at potentially more material
discounts to appraised values whilst this issue continues.
+------+-----------------------------------------------------------------------+
| 4. | Commentary on covenant position |
+------+-----------------------------------------------------------------------+
The Committee confirms that Spazio remains in full compliance with all of its
banking covenants and does not believe that there will be a material movement in
the loan-to-value position as at 30 June 2009 as compared to 31 December 2008.
The Company will continue to retain as necessary excess cash generated from
operations and from the sale of assets to maintain adequate headroom against its
covenants on an ongoing basis.
Further information on the Company's banking covenants is provided in Appendix
III.
+------+-----------------------------------------------------------------------+
| 5. | Recommendation of the Committee |
+------+-----------------------------------------------------------------------+
For the reasons set out above and further explained in this document, the
Committee considers that the Offer significantly undervalues the Company. The
Committee, who have received advice from Deutsche Bank, therefore recommends
that Shareholders reject the Offer. In providing its advice (which is provided
solely for the benefit of the Committee and subject to the terms agreed between
the Committee and Deutsche Bank), Deutsche Bank has taken into account the
commercial assessments of the Directors.
Yours faithfully,
John Duggan
Chairman
1 Adjusted NAV is the reported NAV per Spazio Ordinary Share adjusted for
the OMV of Spazio's development projects, in each case as at 31 December 2008.
2 Pro Forma Adjusted NAV is the Adjusted NAV as at 31 December 2008 adjusted
only for (i) the tender offer completed in January 2009 and the subsequent
proposed cancellation of the treasury shares held by the Company; (ii) the OMV
of the Company's real estate portfolio as at 31 March 2009; (iii) the movement
in the fair value of derivative instruments held by the Company between 1
January 2009 and 31 March 2009; and (iv) asset disposals completed between 1
January 2009 and 31 March 2009. The Pro Forma Adjusted NAV is derived from the
Unaudited Pro Forma Combined Balance Sheet of the Company as at 31 December 2008
as set out in Appendix II.
3 Table 1 has been prepared solely for illustrative purposes and does not
represent and should not be relied on as a guide to the future performance of
the Company nor the valuation of the Portfolio.
4 See Appendix II for the calculation of the Pro Forma Adjusted NAV per
Spazio Ordinary Share as at 31 December 2008.
5 By reference to the OMV of the Company's real estate portfolio as valued
by CBRE as at 31 March 2009.
Appendix I
Summary of the Offer
+-------+----------------------------------------------------------------------+
| 1. | Key Terms |
+-------+----------------------------------------------------------------------+
The key terms of the Offer are set out below:
* the Offer values the existing issued Ordinary Share capital of Spazio at
approximately EUR103.3 million (including the Ordinary Shares held by the Laxey
Group but excluding the treasury shares held by the Company);
* the Offer is subject to an acceptance condition of not less than 50 per cent. in
nominal value of the issued Ordinary Share capital of Spazio (excluding the
existing treasury shares held by the Company) or such lesser percentage as TEI
may decide;
* through the Offer, Laxey is seeking control over the management of Spazio;
* Laxey intends to work with the Board and the Fund Manager and its affiliates;
and
* Laxey will seek to use its influence on the Board and Fund Advisory Committee to
appoint a disposal manager to work with the Fund Manager on the disposal
process.
+-------+----------------------------------------------------------------------+
| 2. | Conditions of the Offer |
+-------+----------------------------------------------------------------------+
As well as the acceptance condition, the Offer contains a broad range of
conditions which are required to be satisfied at the sole discretion of TEI. TEI
has stated in the Offer Document that the first closing date of the Offer is 10
July 2009.
+-------+----------------------------------------------------------------------+
| 3. | Compulsory Acquisition |
+-------+----------------------------------------------------------------------+
In addition, TEI has stated in the Offer Document, that if TEI receives
acceptances under the Offer of, and/or otherwise acquires 95 per cent. or more
in nominal value of Spazio Ordinary Shares to which the Offer relates, TEI
intends to exercise its rights under Dutch law to acquire compulsorily the
remaining Spazio Ordinary Shares in respect of which the Offer has not been
accepted.
+-------+----------------------------------------------------------------------+
| 4. | Facilities |
+-------+----------------------------------------------------------------------+
The Committee confirms that in the event that the Offer proceeds in accordance
with the terms set out in the Offer Document, the Offer will not result in a
breach of, or give rise to any adverse consequences under, the Company's finance
agreements.
Appendix II
Unaudited Pro Forma Combined Balance Sheet of Spazio and Adjusted Pro Forma NAV
as at 31 December 2008
+----------------------------+-------------+---+-------------+----------------------------+-------------+--------------------+---+-------------+---+-------------+--------------------+---+----------------+
| | | Adjustments | |
+----------------------------+-----------------+------------------------------------------------------------------------------------------------------------------------------------------+----------------+
| | | | |
+----------------------------+-----------------+------------------------------------------------------------------------------------------------------------------------------------------+----------------+
| | Combined | | OMV of | | Asset disposals in Q1 2009 | | Fair value | | Tender | | Unaudited Pro |
| | Balance | | real | | | | adjustment | | offer | | Forma Combined |
| | Sheet of | | estate | | | | on | | | | Balance sheet |
| | Spazio as | | assets as | | | | financial | | | | of Spazio and |
| | at 31 | | at 31 | | | | assets in | | | | Pro Forma |
| | December | | March 2009 | | | | Q1 2009 | | | | Adjusted NAV |
| | 2008 (1) | | | | | | | | | | as at 31 |
| | | | | | | | | | | | December 2008 |
+ + + + +----------------------------+ + + + + + + +
| | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+----------------------------------+---+-------------+---+-------------+------------------------+----------------+
| | | | | | | |
+----------------------------+-----------------+------------------------------------------+--------------------------------------+-----------------+--------------------------------------+----------------+
| ASSETS | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Non-current assets | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Investment property(5) (7) | 626,390,000 | | (2,580,000) | | (2,190,000) | | | | | | 621,620,000 |
| (14) | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Current assets | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Inventories(6) (7) | 97,010,496 | | 1,097,406 | | (2,241,325) | | | | | | 95,866,577 |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Trade receivables and | 2,474,153 | | | | | | | | | | 2,474,153 |
| other receivables(2) | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Cash and cash | 79,766,399 | | (1,097,406) | | 3,015,115 | | | | (24,999,964) | | 56,684,144 |
| equivalents(6) (8)(12) | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Total current assets | 179,251,048 | | - | | 773,790 | | - | | (24,999,964) | | 155,024,874 |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Total assets | 805,641,048 | | (2,580,000) | | (1,416,210) | | - | | (24,999,964) | | 776,644,874 |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| LIABILITIES | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Non-current liabilities | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Bank borrowings and | 412,887,003 | | | | (2,056,530) | | | | | | 410,830,473 |
| payables to other | | | | | | | | | | | |
| financial institutions(9) | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Current liabilities | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Bank borrowings and | 115,060 | | | | | | | | | | 115,060 |
| payables to other | | | | | | | | | | | |
| financial institutions | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Trade and other | 17,725,604 | | | | | | | | | | 17,725,604 |
| payables(3) | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Derivative financial | 7,149,793 | | | | | | 6,881,604 | | | | 14,031,397 |
| instruments(11) | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Total current liabilities | 24,990,457 | | - | | - | | 6,881,604 | | - | | 31,872,061 |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| EQUITY | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Share capital | 5,498,279 | | | | | | | | | | 5,498,279 |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Share premium | 274,486,750 | | | | | | | | | | 274,486,750 |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Retained earnings(5) (10) | 87,778,559 | | (2,580,000) | | 640,320 | | (6,881,604) | | (24,999,964) | | 53,957,311 |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Total equity | 367,763,588 | | (2,580,000) | | 640,320 | | (6,881,604) | | (24,999,964) | | 333,942,340 |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Total liabilities and | 805,641,048 | | (2,580,000) | | (1,416,210) | | - | | (24,999,964) | | 776,644,874 |
| equity | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| NAV | 367,763,588 | | | | | | | | | | 333,942,340 |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Issued share capital(13) | 27,491,295 | | | | | | | | (4,545,448) | | 22,945,847 |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| NAV per share | 13.4 | | | | | | | | | | 14.6 |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Adjustment for | 6,079,504 | | | | | | | | | | 5,913,423 |
| inventories(4) (15) | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| | | | | | | | | | | | |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Adjusted NAV | 373,843,092 | | | | | | | | | | 339,855,763 |
+----------------------------+-------------+---+-------------+----------------------------+-------------+------------------------+-------------+---+----------------------------------+---+----------------+
| Adjusted NAV / share | 13.6 | | | | | | | | | | 14.8 |
+----------------------------+-------------+---+-------------+----------------------------+-------------+--------------------+---+-------------+---+-------------+--------------------+---+----------------+
The accompanying notes on pages 10 and 11 are an integral part of the above
unaudited Pro Forma Combined Balance Sheet and Pro Forma Adjusted NAV.
Notes to the unaudited Pro Forma Combined Balance Sheet of Spazio and Pro Forma
Adjusted NAV
+------+-----------------------------------------------------------------------+
| 1. | The Pro Forma Combined Balance Sheet of Spazio as at 31 December 2008 |
| | has been extracted without material adjustment from the historical |
| | financial information of the Company as reported in the 2008 |
| | Financial Statements. |
+------+-----------------------------------------------------------------------+
| 2. | Trade receivables and other receivables aggregates trade receivables |
| | of EUR2,007,725 and other receivables of EUR466,428 as reported in the |
| | 2008 Financial Statements. |
+------+-----------------------------------------------------------------------+
| 3. | Trade and other payables aggregates trade payables of EUR11,691,007, |
| | other payables of EUR5,364,109 and tax payables of EUR670,488 as reported |
| | in the 2008 Financial Statements. |
+------+-----------------------------------------------------------------------+
| 4. | Inventories in respect of development projects, carried at |
| | EUR97,010,496 as at 31 December 2008, are valued at the lower of cost, |
| | including incremental expenses and capitalisable financial charges, |
| | and net realisable value. Adjusted NAV reflects the OMV of the |
| | Company's development projects of EUR103,090,000 as at 31 December 2008 |
| | as determined by CBRE. The adjustment for inventories of EUR6,079,504 |
| | represents the difference between the carrying value of the |
| | inventories and the OMV as at 31 December 2008. |
+------+-----------------------------------------------------------------------+
| 5. | Reflects the EUR2,580,000 decline in the value of the Company's |
| | investment property assets in the period from 31 December 2008 to 31 |
| | March 2009. EUR2,050,000 relates to declines in value determined by |
| | CBRE and EUR530,000 relates to fair value adjustments in respect of |
| | certain assets for which offers were accepted in the three month |
| | period to 31 March 2009 at a price below OMV. |
+------+-----------------------------------------------------------------------+
| 6. | Reflects the capital expenditure on the Company's inventories of |
| | EUR1,097,406 in the period 31 December 2008 to 31 March 2009, also |
| | reflected as a cash outflow in cash and cash equivalents. |
+------+-----------------------------------------------------------------------+
| 7. | Reflects investment property disposed of with a total OMV as at 31 |
| | December 2008 of EUR2,190,000 and inventories disposed of with a total |
| | carrying value as at 31 December 2008 of EUR2,241,325. |
+------+-----------------------------------------------------------------------+
| 8. | Represents the aggregated net sales proceeds from the disposal of |
| | investment property and inventories of EUR5,071,645 less the associated |
| | bank loan reimbursement of EUR2,056,530. |
+------+-----------------------------------------------------------------------+
| 9. | Reflects the EUR2,056,530 bank loan reimbursement related to the |
| | disposals detailed in note (8). |
+------+-----------------------------------------------------------------------+
| 10. | The EUR640,320 increase in retained earnings represents the aggregate |
| | gain realised on disposals of Investment property and inventories |
| | over OMV and carrying value. |
+------+-----------------------------------------------------------------------+
| 11. | Reflects the fair value adjustment to derivative instruments held by |
| | the Company for the period from 31 December 2008 to 31 March 2009. |
+------+-----------------------------------------------------------------------+
+------+-----------------------------------------------------------------------+
| 12. | The Company completed a tender offer on 15 January 2009 resulting in |
| | the purchase by the Company of 4,545,448 Depository Interests from |
| | tendering Shareholders at a price of EUR5.50 per Depository Interest at |
| | a total cost of EUR24,999,964. |
+------+-----------------------------------------------------------------------+
| 13. | Reflects an adjustment for the cancellation of 4,545,448 Shares |
| | currently held in treasury by the Company following the tender offer |
| | on 15 January 2009. These Shares are due for cancellation on 6 July |
| | 2009. |
+------+-----------------------------------------------------------------------+
| 14. | Difference to CBRE appraised OMV of EUR623,300,000 reflects fair value |
| | adjustments of EUR1,680,000 in respect of certain assets for which |
| | offers have been accepted at a price below OMV as at 31 March 2009. |
+------+-----------------------------------------------------------------------+
| 15. | Inventories in respect of development projects carried at EUR95,866,577 |
| | as at 31 March 2009 are valued at the lower of cost including |
| | incremental expenses and capitalisable financial charges, and net |
| | realisable value. Pro Forma Adjusted NAV reflects the OMV of the |
| | Company's development projects of EUR101,780,000 as at 31 March 2009 as |
| | determined by CBRE. The adjustment for inventories of EUR5,913,423 |
| | represents the difference between the carrying value of the |
| | inventories and the OMV as at 31 March 2009. |
+------+-----------------------------------------------------------------------+
Appendix III
Commentary on Financial Covenants
Spazio's position in respect of its loan-to-value covenants as at 31 December
2008 is summarised in the table below. All financial covenants are subject to a
quarterly review the results of which are actively monitored by the Board.
+----+------------------------------+--------------+--------------+--------------+
| | Covenant | LTV as at | Safety |
| | | 31.12.08 | margin to |
| | | | OMV |
+-----------------------------------+--------------+--------------+--------------+
| LTV covenant on individual | | | |
| facilities | | | |
+-----------------------------------+--------------+--------------+--------------+
| | Jumbo loan term facility | 65% | 58.6% | 9.9% |
+----+------------------------------+--------------+--------------+--------------+
| | EGP loan term facility | 65% | 43.9% | 32.5% |
+----+------------------------------+--------------+--------------+--------------+
| | Edificio 16 loan term | 65% | 29.8% | 54.1% |
| | facility | | | |
+----+------------------------------+--------------+--------------+--------------+
| Global LTV covenant | 60% | 56.2% | 6.5% |
+----+------------------------------+--------------+--------------+--------------+
The Global LTV covenant applies to the EGP and Edificio 16 loans only.
Although not a financial covenant, the Fund Rules also require that the overall
loan-to-value ratio of the Fund is maintained below 60 per cent.. If this
loan-to-value ratio is exceeded, the Fund Manager will be required to work with
the Bank of Italy on an acceptable solution to reduce the loan-to-value ratio
below 60 per cent..
As at 31 December 2008, the Company could withstand a 6.5 per cent. fall in the
valuation of its assets from the OMV without triggering a breach of the Global
LTV covenant. Although the Committee does not envisage that a covenant breach
will occur, a breach of any one of these covenants on a test date will not in
itself represent an event of default. The Company's Admission Document states
that:
"Covenants include financial covenants requiring that the Fund maintains a
specified loan to value ratio, prospective loan-to-value ratio and interest
service coverage ratios. Breach of these covenants on a test date will lead to
an automatic cash sweep of funds into a reserve account. If more than one breach
occurs in a year, or if the relevant ratio is materially breached, an event of
default is triggered."
In addition, under the Global LTV covenant, cash in the Company's balance sheet
may only be included in the calculation of Global LTV at 20 per cent. of its
value. Therefore if any cash is applied in repayment of the facilities,
financial indebtedness will be reduced by the full value of such cash in the
calculation of Global LTV. As at 30 June 2009, the Company had approximately EUR16
million of cash that could be used to repay debt and reduce financial
indebtedness and therefore create additional headroom against the Global LTV
covenant.
Appendix IV
Presentation of information, Bases and Sources
+------+-----------------------------------------------------------------------+
| 1. | Unless otherwise stated, the financial information relating to the |
| | Company is derived from the 2008 Financial Statements and other |
| | information made publicly available by the Company. |
+------+-----------------------------------------------------------------------+
| 2. | The Pro Forma Combined Balance Sheet of the Company has not been |
| | subject to an audit or an independent review and has been presented |
| | on the basis set out in Appendix II. |
+------+-----------------------------------------------------------------------+
| 3. | The information contained in this document obtained from third party |
| | sources has been correctly and fairly reproduced. So far as the |
| | Committee is aware and has been able to ascertain from information |
| | published by such third parties, no facts have been omitted, which |
| | would render the reproduced information inaccurate or misleading. The |
| | Committee does not have access to the facts and assumptions |
| | underlying the data extracted from publicly available sources. |
+------+-----------------------------------------------------------------------+
| 4. | Information relating to TEI and the Laxey Group is sourced from the |
| | Offer Document and other material made publicly available by Laxey |
| | and TEI. |
+------+-----------------------------------------------------------------------+
| 5. | Values stated throughout the document have been subjected to rounding |
| | and are given to the stated number of decimal places. |
+------+-----------------------------------------------------------------------+
| 6. | This document contains certain forward-looking statements with |
| | respect to the financial condition, results of operations and |
| | business of the Company Investment N.V. and the Fund. All statements |
| | other than statements of historical facts included in this document |
| | may be forward-looking statements. Forward-looking statements often |
| | use words such as "target", "plan", "believe", "expect", "aim", |
| | "intend", "will", "should", "could", "would", "may", "consider", |
| | "anticipate", "estimate" or words or terms of similar substance or |
| | the negative thereof. By their nature, forward-looking statements |
| | involve risk and uncertainty and the factors described in the context |
| | of such forward-looking statements in this document could cause |
| | actual results and developments to differ materially from those |
| | expressed in or implied by such forward-looking statements. Should |
| | one or more of these risks or uncertainties materialise, or should |
| | underlying assumptions prove incorrect, actual results may vary |
| | materially from those described in this document. All forward-looking |
| | statements included in this document are based on information |
| | available at the date of this document. Undue reliance should not be |
| | placed on such forward-looking statements. Except as required by |
| | applicable law, the Company assumes no obligation to update or |
| | correct the information contained in this document. |
+------+-----------------------------------------------------------------------+
DEFINITIONS
The following definitions apply throughout this document unless the context
requires otherwise:
+-------------------------------+-------------------------------------------------+
| "2008 Financial Statements" | Spazio's consolidated annual report and |
| | accounts for the year ended 31 December 2008; |
+-------------------------------+-------------------------------------------------+
| "Accelerated Business Plan" | the plan whereby the Company disposes of real |
| | estate assets, suspends its acquisition |
| | activities and limits its development |
| | activities in order to enable the Company to |
| | make cash returns to Shareholders; |
+-------------------------------+-------------------------------------------------+
| "Adjusted NAV" | the reported net asset value per Spazio |
| | Ordinary Share adjusted for the OMV of Spazio's |
| | development projects as at 31 December 2008; |
+-------------------------------+-------------------------------------------------+
| "Admission Document" | the Company's admission document dated |
| | 13 October 2006; |
+-------------------------------+-------------------------------------------------+
| "AIM" | the alternative investment market of the London |
| | Stock Exchange; |
+-------------------------------+-------------------------------------------------+
| "AIM Rules" | the AIM rules for Companies published by the |
| | London Stock Exchange from time to time; |
+-------------------------------+-------------------------------------------------+
| "Australia" | the Commonwealth of Australia, its states, |
| | territories and possessions; |
+-------------------------------+-------------------------------------------------+
| "Board" or "Directors" | the management board of directors of the |
| | Company from time to time; |
+-------------------------------+-------------------------------------------------+
| "Canada" | Canada, its provinces and territories and all |
| | areas subject to its jurisdiction and any |
| | political sub-division thereof; |
+-------------------------------+-------------------------------------------------+
| "CBRE" | CB Richard Ellis Professional Services S.p.A.; |
+-------------------------------+-------------------------------------------------+
| "Closing Price" | the closing middle market quotation of an |
| | Ordinary Share as derived from the AIM appendix |
| | to the Daily Official List of the London Stock |
| | Exchange; |
+-------------------------------+-------------------------------------------------+
| "Code" | The City Code on Takeovers and Mergers; |
+-------------------------------+-------------------------------------------------+
| "Committee" | the independent committee formed by the Board |
| | for the purpose of evaluating the Offer |
| | consisting of John Duggan, Roy Dantzic and |
| | Richard Mully; |
+-------------------------------+-------------------------------------------------+
| "Company" or "Spazio" | Spazio Investment N.V.; |
+-------------------------------+-------------------------------------------------+
| "Depository Interest" | a dematerialised depository interest which |
| | represents an entitlement to a Spazio Ordinary |
| | Share; |
+-------------------------------+-------------------------------------------------+
| "Deutsche Bank" | Deutsche Bank AG, London Branch, nominated |
| | adviser to Spazio Investment N.V.; |
+-------------------------------+-------------------------------------------------+
| "Fund" | Spazio Industrale - Fondo Comune di |
| | Investimento Immobiliare di Tipo Chiuso; |
+-------------------------------+-------------------------------------------------+
| "Fund Manager" | Pirelli & C Real Estate Società di Gestione del |
| | Risparmio S.p.A; |
+-------------------------------+-------------------------------------------------+
| "Fund Rules" | the rules governing the Fund dated 29 December |
| | 2005 (as amended); |
+-------------------------------+-------------------------------------------------+
| "IRR" | internal rate of return; |
+-------------------------------+-------------------------------------------------+
| "Laxey" | Laxey Partners Limited (including, where |
| | applicable, TEI and any investment funds |
| | managed by Laxey or its associated companies); |
+-------------------------------+-------------------------------------------------+
| "Management Team" | the management team dedicated to Spazio |
| | comprising Alberto Iori, Fabrizio Lauro, |
| | Giacomo Sonzini, Giordano Graff, Silvia |
| | Savasta, Stefania Mandelli, Giordano Barbieri, |
| | Andrea Fancese, Mario Angelini, Marco Maccario |
| | and Marco Monselesan, who work for Spazio on a |
| | full-time basis and Rodolfo Petrosino, Renzo |
| | Misitano and Francesco Allegretta, who work |
| | for Spazio on a part-time basis; |
+-------------------------------+-------------------------------------------------+
| "Offer" | the offer made on 19 June 2009 by TEI for the |
| | whole of the issued and ordinary issued share |
| | capital of the Company on the terms of the |
| | Offer Document; |
+-------------------------------+-------------------------------------------------+
| "Offer Document" | the offer document posted by TEI to Spazio's |
| | Shareholders on 19 June 2009; |
+-------------------------------+-------------------------------------------------+
| "Offer Price" | EUR4.50 in cash per Spazio Ordinary Share; |
+-------------------------------+-------------------------------------------------+
| "OMV" | open market value; |
+-------------------------------+-------------------------------------------------+
| "Ordinary Shares" or "Spazio | the existing issued fully paid (or credited as |
| Ordinary Shares" | fully paid) Ordinary Shares of EUR0.20 each in |
| | the capital of the Company, including |
| | dematerialized Depository Interests |
| | representing such shares; |
+-------------------------------+-------------------------------------------------+
| "Pirelli RE" | Pirelli & C. Real Estate S.p.A.; |
+-------------------------------+-------------------------------------------------+
| "Portfolio" | the investment assets and development |
| | properties owned by the Fund; |
+-------------------------------+-------------------------------------------------+
| "Pro Forma Adjusted NAV" | adjusted NAV per Spazio Ordinary Share as at 31 |
| | December 2008 adjusted only for (i) the tender |
| | offer completed in January 2009 and the |
| | subsequent proposed cancellation of the |
| | treasury shares held by the Company; (ii) the |
| | OMV of the Company's real estate portfolio as |
| | at 31 March 2009; (iii) the movement in the |
| | fair value of derivative instruments held by |
| | the Company between 1 January 2009 and 31 March |
| | 2009; and (iv) asset disposals completed |
| | between 1 January 2009 and 31 March 2009; |
+-------------------------------+-------------------------------------------------+
| "Shareholders" or "Spazio | holders of Spazio Ordinary Shares from time to |
| Shareholders" | time; |
+-------------------------------+-------------------------------------------------+
| "TEI" | Terra European Investments B.V.; |
+-------------------------------+-------------------------------------------------+
| "Unaudited Pro Forma Combined | means the unaudited pro forma balance sheet of |
| Balance Sheet" | the Company as at 31 December 2008 prepared on |
| | the basis set out in Appendix II; and |
+-------------------------------+-------------------------------------------------+
| "US", "USA" or "United | The United States of America, its territories |
| States" | and possessions, any state of the United States |
| | of America and the District of Columbia and all |
| | other areas subject to its jurisdiction. |
+-------------------------------+-------------------------------------------------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
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