STOCKHOLM, Sweden, Feb. 15, 2002 (PRIMEZONE) -- The board of Fastighets AB Tornet (publ) has decided to acquire all shares in Amplion Fastigheter AB.
-- The acquisition entails that Tornet will make a total payment
of SEK 1 040 million for all shares in Amplion. This payment
consists of cash and 2 564 301 Tornet shares. The shares will be
transferred on 1 March 2002.
-- Acquisition of Amplion will considerably strengthen Tornet in
Sweden's three largest cities, Stockholm, Gothenburg and Malmo.
The market position at Tornet's prioritised locations Uppsala,
Vasteras, Norrkoping and Karlstad will also be reinforced. After
the acquisition, Tornet's properties have a yield of 8.0 per cent.
-- Tornet makes the assessment that an acquisition will create
synergy benefits by reducing costs primarily for administration
of SEK 30 million annually.
-- Earnings per share pro forma will increase by 33 per cent to
SEK 13.73.
-- Amplion's properties have been valued by Catella. Net worth per
share increases by 10 per cent through the acquisition.
-- In the present situation, an acquisition of Amplion will have a
better effect on earnings and cash flow per share than a
repurchase of shares. The acquisition of Amplion demands a period
of consolidation during which Tornet intends to divest properties
to restore initially the reported equity ratio in order to
subsequently be able to continue repurchasing Tornet shares.
-- Alecta, formerly SPP, becomes the new major owner of Tornet
with 12.9 per cent of the shares and votes.
Background and motivation for the acquisition Since listing in 1996, the Tornet share has been well received by the stock market, which shows confidence in Tornet's ability to engage in rational, value-creating property management. The development of Tornet's share price has been stronger than both the property index and the stock exchange index as a whole since listing.
Due to its size and nationwide organisation, Tornet has had good prerequisites to continue to participate actively in the structural transformation of the Swedish property market. In its vision statement, Tornet has expressed a willingness to acquire another company with the intention of becoming even larger than at present in Sweden's largest cities. This acquisition entails that Tornet will increase its property holdings markedly in Gothenburg and the Oresund region. After the acquisition, Stockholm, Gothenburg and Oresund account for 52 per cent of the total property holding measured as market value.
Amplion's property holdings consist of approximately 801 000 sq.m. office, industrial and shop premises. Over 68 per cent of the properties measured as book value per 31 December 2001 (SEK 3 376 million) are situated in one of Tornet's eight prioritised cities Stockholm, Gothenburg, Oresund, Uppsala, Linkoping, Vasteras, Norrkoping or Karlstad.
The acquisition of Amplion is considered to have a more positive effect in the present situation on both earnings per share and cash flow per share than a further repurchase programme. The acquisition entails that repurchase of Tornet's shares must wait until the company has been consolidated and the equity ratio restored to 25 per cent. If there is still a net worth discount and/or the liquidity of the share is considered to be weak, the repurchase programme will be resumed.
Tornet pro forma Tornet pro forma Tornet+Amplion
without Repurchase pro forma
repurchase
Cash flow per 20.47 21.07 26.60
share
Earnings per 10.30 10.50 13.73
share
No. of shares 23 998 22 798 26 562
In the light of the above, Tornet's board and executive management have made the assessment that considerable synergies can be achieved in property management.
Financing
Interest-bearing liabilities in a syndicated loan of SEK 3.7 billion are being transferred on nearly unchanged conditions to Tornet. The term is 21 months and the rate of interest 5.6 per cent. Tornet will additionally make a payment of SEK 1 040 million. The payment will consist of 2 564 301 Tornet shares, a newly-issued subordinated debenture of SEK 250 million with a term of 24 months and an interest rate of 8 per cent to the sellers of Amplion and cash.
Effects of the Acquisition
Effects on the property holding The property holdings of the respective company and for the merged company as per 31 December 2001, are shown below.
Geographical distribution of the properties' book values, SEK m
Geographical area Tornet Share, Amplion Share, Tornet/Amp- Share
% % lion , %
Stockholm 3 780 27 814 17 4 594 24
Gothenburg 1 323 9 1 058 21 2 381 13
Oresund 1 438 10 902 18 2 340 12
Uppsala 1 192 8 153 3 1 345 7
Linkoping 1 622 12 - - 1 622 9
Vasteras 1 646 12 99 2 1 745 9
Norrkoping 1 258 9 182 4 1 440 8
Karlstad 773 6 168 3 941 5
Region Norr 149 1 981 20 1 130 6
Rest of Sweden* 213 2 587 12 800 4
Sweden 13 394 96 4 944 100 18 338 97
Abroad 627 4 - - 627 3
Total 14 021 100 4 944 100 18 965 100
Share of total 74 26 100
book value
(*)The properties are managed in three management units: Vaxjo
(14 properties/book value of SEK 296 million), Boras
(13 properties/SEK 322 million) and Uddevalla
(10 properties/SEK 182 million).
Geographical distribution of lettable area, thousand sq.m.
Geographical Tornet Share, Amp- Share, Tornet/Amp Share, area % lion % lion % Stockholm 552 24 112 14 664 21 Gothenburg 271 12 126 16 397 12 Oresund 219 9 108 13 327 10 Uppsala 132 6 21 3 153 4 Linkoping 250 11 - - 250 8 Vasteras 285 12 17 2 302 10 Norrkoping 298 13 32 4 330 11 Karlstad 91 4 23 3 114 5 Region Norr 38 2 195 24 233 8 Rest of Sweden 74 3 167 21 241 8 Sweden 2 210 96 801 100 3 011 97 Abroad 89 4 - - 89 3 Total 2 299 100 801 100 3 100 100 Share of total 74 26 100 area
Distribution of holding in different types of property, lettable area
Tornet, % Amplion, % Tornet+Amplion, %
Housing 33 1 25
Offices 24 55 32
Shops 8 3 7
Industry 19 37 23
Other 16 4 13
Pro forma
Below is shown the statement of income and balance sheet for Tornet before and after completed acquisition pro forma, on the basis of the respective company's annual accounts bulletins as per 31 December 2001. Tornet makes the assessment that the acquisition will create synergy benefits in the range of SEK 30 million. Structural expenses of SEK 150 million have been taken into account in the following table.
Tornet Tornet/Amplion
Statement of income, prel. pro prel. Pro
forma forma
SEK m
Rental income 1 896 2 592
Operating expenses -837 -1 080
Operating profit 1 059 1 512
Depreciation -148 -199
Gross income 911 1 313
Central -20 -18
administration
Operating income 891 1 295
Net financial income -548 -788
Profit before tax 343 507
Tax -96 -142
Net profit for the 247 365
year
Tornet Tornet/Amplion
Balance sheet, SEK m prel. pro prel. pro
forma forma
Assets
Properties 14 021 18 965
Other assets 842 1 029
Liquid assets 106 152
Total assets 14 969 20 146
Equity and
liabilities
Equity 4 022 4 564
Interest-bearing 9 652 13 847
liabilities
Other liabilities 1 295 1 735
Total equity and 14 969 20 146
liabilities
Key ratios
Financial
Earnings per share, 10.30 13.73
SEK
Cash flow per share, 20.47 26.60
SEK
Shareholders' equity 167.60 171.83
per share, SEK
Equity ratio, % 26.9 22.7
Debt-to-equity ratio, 2.3 3.0
times
Interest coverage 1.6 1.6
ratio, times
Debt to book value 68.8 71.8
ratio, properties, %
No. of shares, 23 998 26 562
thousands
Return on 6.1 8.0
shareholders' equity,
%
Return on capital 6.5 7.0
employed, %
Return on total 5.9 6.4
capital, %
Property-related
Occupancy ratio, % 93.2 92.8
Yield, % 7.6 8.0
Profit ratio, % 55.7 58.3
Equity Ratio
The equity ratio is to be restored to 25 per cent during the next 12 months. Catella has valued Amplion's properties at SEK 5.8 billion. The market value of Tornet's property holdings is SEK approximately 22 billion after the acquisition. Tornet's adjusted equity ratio amounts, after acquisition of Amplion, to 33.3 per cent.
Taxes
Tornet's equity after the acquisition has been adjusted on the basis of the tax effects that arise due to the acquisition. Tax losses carried forward in the Group after the acquisition amount to appr. SEK 2.2 billion.
Tornet's Repurchase Programme
During 2000, 10 per cent of the outstanding Tornet shares were repurchased. The cancellation of these shares was registered by the Swedish Patent and Registration Office on 12 February 2001. A second repurchase programme of 10 per cent was initiated on 22 February 2001. Tornet has to date repurchased 9.7 per cent of the number of outstanding shares, which are now being used in part payment for the acquisition of Amplion. The acquisition means that the repurchase of Tornet's shares during a transitional period must wait while consolidation takes place with the intention of restoring the reported equity ratio to 25 per cent. If there is still a net worth discount and/or the liquidity of the share is considered to be weak, the repurchase programme will be resumed after the transitional period.
Preliminary Ownership Structure
The acquisition of Amplion means that the shares previously repurchased will be used as part financing. Alecta and the American fund Harbert Group will become the new owner of these shares. Tornet's preliminary ownership structure after acquisition of Amplion is shown in the following table.
Shareholder No. of shares Share, % Alecta 3 420 914 12.9 Fidelity Funds 2 625 756 9.9 Perry Capital Ltd 2 460 022 9.3 Lansdowne Partners 2 006 396 7.6 Ltd Franklin-Templeton 1 583 320 6.0 funds Highfields Funds 1 483 186 5.6 Skandia 1 369 749 5.2 Robur fonder 505 000 1.9 Harbert Group 483 816 1.8 Other 10 624 087 39.8 Total 26 562 246 100.0 Source: SIS Agarservice AB
Proposed new board The Nominations Committee has started its work to overview the board representation after the change in the ownership structure.
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