Société Foncière Lyonnaise and Inmobiliaria Colonial: A Merger for Prime Real Estate Dominance

Société Foncière Lyonnaise (SFL) and Inmobiliaria Colonial have signed a merger agreement, marking a significant step towards creating a leading prime real estate platform in Europe. The proposed cross-border merger, approved by both boards of directors, aims to simplify the group's structure and strengthen its position in the prime commercial real estate market.

The exchange ratio has been set at 13 Colonial shares for 1 SFL share, representing a significant premium on net asset value (NTA) parity. Additionally, an exit price of €77.5 per SFL share has been determined, which will be adjusted by the amount of SFL's dividend to be approved by its general meeting prior to the merger. The exchange ratio and exit price have been determined based on a multi-criteria analysis reflecting commonly used valuation methods.

The merger is expected to generate substantial synergies and cost savings, enabling SFL shareholders to remain invested in the value creation potential of the group with significantly enhanced liquidity or to access full liquidity at a price corresponding to the multi-criteria valuation of SFL. The combined entity will have a diversified portfolio of commercial real estate assets in prime locations across Europe, with a total market value exceeding €19 billion and a total area of over 1.1 million square meters.

However, the proposed merger raises potential antitrust concerns, as it would result in a significant increase in market concentration in the prime commercial real estate market in Europe. The combined entity would have a dominant position in the market, potentially leading to higher prices and reduced competition. The European Commission will need to conduct a thorough assessment of the merger's effects on competition in the relevant markets and may impose remedies to mitigate any negative effects.

In conclusion, the signing of the agreement to merge Société Foncière Lyonnaise into Inmobiliaria Colonial is a significant event in the European prime real estate market. The merger is expected to create a leading platform in the market, with substantial synergies and cost savings. However, potential antitrust concerns must be addressed to ensure that the merger does not negatively impact competition in the market. The European Commission will play a crucial role in assessing the merger's effects on competition and imposing remedies if necessary.