Gazit Globe (NYSE1/TASE: GZT), a leading global real estate company
focused on the ownership, management and development of retail and
mixed use properties in urban markets, announced today that Gazit
Globe and its wholly-owned subsidiary ("Gazit" or the “Company”),
entered into agreements related to its stake in First Capital
Realty (TSX: FCR) ("FCR"), which are subject to certain conditions
including the approval of the majority of FCR’s shareholders
excluding Gazit, to sell 58 million shares of FCR at a price of CAD
$ 20.60 per share for aggregate consideration of approximately CAD
$1.2 billion (approximately NIS 3.3 billion). If completed, Gazit’s
ownership interest in FCR would be reduced from approximately 31.3%
currently to approximately 9.9%.
The prospective sales will be carried out via
two, parallel transactions: (i) a direct buy-back by FCR of 36
million of the FCR shares held by Gazit; and (ii) a fully
underwritten, bought, secondary offering in which an additional 22
million FCR shares held by Gazit will be offered to Canadian
investors in a syndication led by RBC Capital Markets.
Chaim Katzman, Founder and CEO
Commented: “This transaction is yet another important step
in implementing Gazit Globe’s strategy, announced more than two
years ago, to decrease our stake in mature public equity
investments, reduce the company’s leverage, and increase our direct
real estate holdings while focusing on dominant assets in major
urban markets where we can create value through proactive
management. Following the sale, which is subject to certain
conditions, including the approval by a majority of FCR’s
shareholders, excluding Gazit, the company’s direct real estate
holdings as a percentage of its total investments (based on
September 30, 2018 results) is expected to reach 44%, compared to
20%2 at December 31, 2016, while the company’s leverage (expanded
solo) is expected to be reduced to below 45%.
Following this sale, Gazit Globe will have
completed two major strategic transactions in the last two years,
in which the company will have divested of public equity
investments for an aggregate consideration of approximately NIS 8
billion in cash with an annual levered IRR of approximately 20% in
each. We are determined to continue to advance our strategy to
increase our direct real estate holdings and are focused on North
America, where we have decades of experience, a deep management
team, and a thorough understanding of the real estate market.
Simultaneously, we will continue our efforts to improve the quality
of our direct investments in Brazil, and both improve the quality
of and increase our direct investments in Israel. In Europe,
meanwhile, our strategy will be to continue to enhance the quality
of our assets through proactive management as well as through other
initiatives.
From Gazit's perspective, it is clear that this
transaction, upon approval, will be a major milestone in the
company’s evolution, and is really a “game changer” for us. I'm
convinced that once completed, Gazit will be successfully back to
its “roots” as a direct real estate investor dedicated to acquiring
irreplaceable assets, supported by a strong balance sheet with high
liquidity, and led by a best in class, dedicated management team
committed to creating value and delivering outsized returns for its
investors."
__________________________
1 In February 13, 2019 Gazit Globe announced planned NYSE
Delisting.2 IRR calculation is based on management analysis of
Gazit’s levered return on its investment.
Buy-Back by FCR
FCR will purchase from Gazit approximately 36
million shares (constituting 14.1% of FCR’s issued and outstanding
share capital) for gross proceeds of approximately CAD $742
million. The closing of the buy back under the buy-back transaction
agreement is subject to certain conditions, including (i) the
approval of the buy-back by a majority of FCR’s shareholders,
excluding Gazit, and (ii) the consummation of the pre-bought,
underwritten offering (as described below).
At the time of the signing of the buy-back
agreement, FCR will pay Gazit CAD $3.0 million. This amount will be
credited to the payment of the buy-back purchase price and will be
retained by Gazit if the buy-back transaction is terminated in
certain circumstances, including if FCR shareholders do not approve
the buy-back transaction.
Upon the closing of the buy-back transaction and
for as long as the Company holds at least 5% of FCR's issued and
outstanding share capital, Gazit will be entitled to nominate one
director to FCR’s board of directors as outlined in the transaction
agreement.
Bought, Fully Underwritten
Offering
Gazit has entered into an agreement to sell 22
million FCR shares, representing approximately 8.6% of FCR’s issued
and outstanding share capital, on a "bought deal" basis to a
syndicate of underwriters led by RBC Capital Markets for gross
proceeds to Gazit of approximately CAD $453 million. (The “Bought
Deal Consideration”). The closing of the bought deal under the
bought deal transaction agreement is subject to certain conditions,
including the approval of the buy-back transaction by a majority of
FCR’s shareholders, excluding Gazit.
The Bought Deal Consideration will be paid to the Company in
two, equal installments, the first of which will be paid into
escrow with a custodian upon the closing of the bought deal
transaction (with release to Gazit upon closing of the buy-back
transaction) and the second of which will be paid 12 months
following the closing. All of the bought deal shares will be held
by a custodian and will be registered in the name of the purchasers
only upon the payment of the second installment. At closing, the
shares will be pledged to Gazit to secure payment of the second
installment. If the second installment is not fully paid to the
Company, the bought deal shares of beneficial holders who fail to
pay the final installment may (subject to certain restrictions) be
returned to the Company, without refund by the Company of the first
installment already paid for those shares in full satisfaction of
the holder’s obligations or sold on behalf of Gazit, in which case
such holder will be liable to Gazit to the extent the net proceeds
of such sale are less than the outstanding second installment.
Following the signing of the bought deal transaction, the Company
will not be entitled to dividends with respect to the bought deal
shares nor, following closing of the buy-back transaction, to
voting rights with respect to the bought deal shares. FCR will pay
half of RBC's underwriting commission for the bought deal.
The bought deal transaction will be carried out under a
prospectus to be filed by FCR with the closing expected to occur on
or about April 11, 2019, subject to regulatory approvals.
Additional Details of
Transactions
Following the buy back and the bought deal
transaction, Gazit will own approximately 21.6 million common
shares of FCR ("Remaining Shares"), which will represent
approximately 9.9% of FCR's outstanding share capital and voting
rights.
The remaining FCR shares to be held by the
Company following the transactions will be presented in the
Company’s financial statements as a financial asset, beginning as
of the closing of the transactions.
The Company and its subsidiary have undertaken
that for a period of one year from the closing of the bought deal
transaction, they will not enter into any sale transactions in
respect of their holdings in FCR, subject to certain exceptions,
without the approval of FCR and the underwriters during the first
six months following such closing and without the approval of FCR
during the second six months following such closing. In addition,
FCR and FCR’s directors have undertaken that for a period of 180
days from the bought deal transaction, they will not enter into any
sale transactions in respect of their holdings in FCR, subject to
certain exceptions, without the approval of the underwriters.
Gazit acquired a controlling interest in FCR in
2000. Through proactive management, acquisitions, divestments and
M&A deals, FCR became one of the largest owners, developers and
operators of necessity-based real estate located in Canada’s most
densely populated urban centres, with a portfolio value of
approximately CAD $10.5 billion and market capitalization of
approximately CAD $5.5 billion.
Upon completion on the transaction,
Gazit Globe will have achieved an annual leveraged IRR3 of
approximately 20% on its investment in FCR, which
illustrates the value Gazit has generated for its investors over a
period of almost two decades.
Upon completion of the transaction,
Gazit's leverage ratio (expanded solo) after expenses is expected
to decrease to below 45%.
Upon the closing of both transactions, the
Company is expected to recognize a reduction in its shareholders’
equity by approximately NIS 510 million, which includes an expense
of CAD $95 million (approximately NIS 264 million) for taxes
(including a deferred tax liability of approximately CAD $26
million for Gazit’s remaining FCR shares) and CAD $88 million
(approximately NIS 246 million) of transaction costs, including the
offering discount to FCR and third parties, and offset from the
realization of currency translation reserves of approximately NIS
90 million, which reduces the net loss to approximately NIS 420
million.
Lazard acted as Gazit's financial advisor and
McCarthy Tétrault LLP acted as Gazit’s legal advisor in the
transaction.
Chaim Katzman, Founder and CEO
Added: “Together with my partner, Dori Segal, we entered
the Canadian market in the year 1998, acquiring our first asset for
CAD $15 million. Today FCR is one of the largest owners, developers
and operators of necessity-based urban real estate in Canada with
asset value of more than CAD $10 billion led by high quality
management team headed by Adam Paul. Over the last 19 years, FCR
has delivered exceptional returns to all of its shareholders and we
wish FCR and its management great success in the future."
About Gazit GlobeGazit Globe is
a leading global real estate company focused on the ownership,
management and development of retail and mixed-use properties in
North America, Brazil, Israel, northern, central and Eastern
Europe, located in urban growth markets. Gazit Globe is listed on
the New York Stock Exchange (NYSE: GZT) and the Tel Aviv Stock
Exchange (TASE: GZT) and is included in the TA-35 index in Israel.
As of September 30, 2018, Gazit Globe owns and operates 101
properties, with a gross leasable area of approximately 2.5 million
square meters and a total value of approximately NIS 38.6
billion.
_____________________3 IRR calculation is based
on management analysis of Gazit’s levered return on its investment
in FCR in NIS.
FOR ADDITIONAL INFORMATIONA comprehensive copy
of the Company’s financial report is available on Gazit Globe
website at www.gazitglobe.com
Investors Contact: IR@gazitgroup.com, Media Contact:
PR@gazitgroup.comGazit Globe Headquarters, Tel-Aviv, Israel, Tel:
+972 3 6948000
Cautionary Note Re: Forward-Looking
Statements:
This press release includes certain
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements include all statements that are not statements of
historical fact. Forward-looking statements herein include those
statements regarding Gazit’s ability to execute its operating plan
and future financial performance and any other statements that are
not statements of historical fact. These statements may be
identified, without limitation, by the use of forward-looking
terminology such as “anticipates”, “expects,” “will” or comparable
terms or the negative thereof. Such statements are based on
management’s current estimates, assumptions that management
believes to be reasonable, and currently available competitive,
financial, and economic data as of the date hereof. Forward-looking
statements are inherently uncertain and subject to a variety of
events, factors and conditions, many of which are beyond the
control of Gazit and not all of which are known to Gazit,
including, without limitation, Gazit’s ability to realize
anticipated cost savings from its delisting and deregistration, its
ability to timely and effectively implement its delisting and
deregistration, adverse effects on share price and liquidity
following Gazit’s deregistration, as well as more general business
and financial risks such as those risk factors described from time
to time in Gazit’s reports filed with or furnished to the SEC, ISA
and TASE. Investors should keep in mind that Gazit’s financial
results in any particular period may not be indicative of future
results. Gazit is under no obligation to, and expressly disclaims
any obligation to, update or alter its forward-looking statements,
whether as a result of new information, future events, changes in
assumptions or otherwise, except as required by law.
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