Brookfield to buy Unitech subsidiary for Rs 2,000 cr

Canada-based Brookfield Property has entered into an agreement to acquire Candor Investments, a subsidiary of Unitech Corporate Park (UCP), for about Rs 2,000 crore.

In an announcement to London Stock Exchange, UCP said it had entered into an agreement with an affiliate of Brookfield Property Partners for the sale and purchase of the entire issued share capital of Candor, subject to conditions, for a cash consideration of about £205.9 million (about Rs 2,034 crore).

Through its subsidiaries, Candor Investments holds 60 per cent stake in six properties—two in Gurgaon, three in Noida and one in Kolkata; the Unitech group owns the rest of the equity.

LIFE SAVER

• Candor Investments holds 60% stake in 6 properties; the Unitech group owns the rest of the equity
• Unitech said of a total of 6 special economic zones, it had transferred its interest in four to an independent third party
• The amount raised through the deal will likely be used to reduce Unitech’s debt, at Rs 6,200 crore in 2013-14

In a separate statement to the BSE, Unitech said of a total of six special economic zones , it had transferred its interest in four (the most developed) to an independent third party. As part of the transaction, certain affiliates of Unitech will continue to manage and develop these assets to ensure there is no impact on tenants and other stakeholders.

Sources privy to the deal said Unitech sold the stake for about Rs 1,500 crore, adding it was likely most of the funds would be used to refinance the company’s debt. For 2013-14, Unitech’s debt stood at Rs 6,200 crore.

In April this year, UCP had said a party had expressed interest in acquiring its subsidiary Candor Investments, the holding company for UCP’s property interests.

After completion of the deal, UCP is expected to have cash resources to provide shareholders capital returns of about 56 pence/ordinary share in aggregate, a 45 per cent premium to the share price on April 2 and a 79.2 per cent premium to its lowest share price in the last 12 months (September 25, 2013).

The deal will require the approval of shareholders, in accordance with the AIM Rules for Companies. It will also seek shareholder approval to adopt a new investing policy to return capital to shareholders, following the completion of the Candor sale. In this regard, an extraordinary general meeting is scheduled to be held on June 27.

Donald Lake, chairman of UCP, said, “The offer for UCP’s property interests from Brookfield at more than the latest book valuation reflects the hard work put in through recent years to let the office space and grow income to achieve the best possible price on behalf of investors in the company. The independent directors believe the proposed sale represents a very attractive opportunity for investors to realise strong value from the properties and facilitate a distribution of the proceeds.”

On Wednesday, the Unitech stock closed at Rs 33.95 on BSE, down 7.11 per cent.