Milano Centrale’s €2.3bn bid for Unim would take the quoted firm private again. Some think this would be bad for Italian property
Since Milano Centrale, the private arm of Italian industrial giant Pirelli, made a dramatic €2.3bn (L4.45bn) bid in September for Unim, the largest quoted property company in Italy and the Eurozone, the parties involved have gone quiet.
Unim is the real estate spin-off of Italian insurance giant INA, created last year. The real estate assets are chiefly office and residential located in the country’s main property markets of Milan and Rome.
Under Italian stock exchange rules the parties engaged in a bid situation are not allowed to comment publicly on their actions and it may be that other, bigger, non-property mergers and acquisitions have pushed it out of the headlines.
Compared to these, Unim’s market capitalisation is small and even other property matters, for example, state-run energy company ENI seeking buyers for its huge property portfolio, may have helped to eclipse it.
The silence around Milano Centrale’s bid had prompted cynics in some quarters to say that Pirelli merely wanted to signal an intention to embolden its hitherto low-key presence in the Italian property market. If Milano Centrale’s bid for Unim is successful, it would see Milano Centrale become the market leader in property management and the sale of public and private property projects.
But the fact that it has now brought forward its timetable for the bid suggests it is in deadly earnest. Originally timed for the first week of 2000, it is now set for this month after rumours emerged in the market that there is at least one other competing bidder about to show its hand.
Other commentators think that the reasons for the silence is because Unim is, quite simply, happy with the bid, which Milano Centrale has been at pains to describe as “non-hostile”. Unim senior management may feel their jobs and strategies are secure and there would be, therefore, no tensions to be aired in public.
But not everyone is happy with Milano Centrale’s bid. Many market observers were pleased with Unim’s public quotation. It meant that there was a potentially useful benchmark for the performance of Italian property and some regret that Unim would be taken private again.
Although there is a mood of increasing commitment to transparency among Italian companies that either have already, or are trying to attract, international interest, there are few, if any, publicly quoted Italian property companies that can give useful indications of general property performance in the country.
Unim has also been much happier to talk about its strategy and intentions in public than has normally been the case among Italian property companies.
Recently it admitted it was anxious to get its hands of the 700,000m2 property portfolio of state-run energy company ENI. This is worth around €1.03bn (L2trn) to €1.55bn (L3trn).
Some observers were disappointed that Unim had made no high-profile acquisitions after its stock market debut. But in truth Unim had started to actively manage its portfolio.
Last month it said that over the past three years it sold real estate worth over €2.5bn (L600bn), turning profits on the sales of between 5% and 10%. It was also planning to sell some underperforming residential property worth around €413m to €464m (L800bn to L900bn) in order to acquire better assets. A spokesman also said it was “interested in buying anything that’s moving in Italy”.
By contrast, Milano Centrale is very secretive.
Another factor underpinning Milano Centrale’s commitment to the bid is its choice of investment bank Morgan Stanley as its advisor. The bank is the busiest US player in Italy today.
Morgan Stanley is also an obvious choice since it knows Unim very well having advised last year on Unim’s spin-off.
It is also not the first time that Milano Centrale and the US bank have done business together.
In June, in one of Italy’s biggest ever real estate deals, Milano Centrale and the investment bank became partners when they bought a €113m (L220bn) property portfolio.
The companies paid €217m (L420bn) for Iniziativa Edizia, a subsidiary of Italian industrial company, Gruppo Compart-Montedison; the properties comprised the parent company’s non-operational assets.
Morgan Stanley has the lion’s share of the joint venture with 75% while Milano Centrale has a 25% stake. The portfolio consists mainly of income-producing offices chiefly in Milan, with some in Livorno and Perugia.
Last December, the US investment bank acted in Italy’s first securitisation of commercial property. Fiat Group sold a portfolio of Turin office buildings to a special purpose company.
Morgan Stanley bought the properties using a domestic syndicated loan guaranteed by the future rent cashflow and the properties.
The deal was valued at €216bn (L420bn). Morgan Stanley, which will own the equity in the company will be able to sell or redevelop the properties at lease expiry. Fiat leased back nine buildings from the portfolio.
Meanwhile, Morgan Stanley has also been involved in securitising the non-performing real estate loans for Italian banks San Paolo di Torino and Cassa Di Risparmio in Bologna. It also buys for its own book.
