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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Bulgarian Prop. | LSE:BPD | London | Ordinary Share | GB00B058TT05 | ORD 25P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 16.50 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
RNS Number:1830L Bulgarian Property DevelopmentsPLC 07 January 2008 FOR IMMEDIATE RELEASE 07 January 2007 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM AUSTRALIA, CANADA, JAPAN OR THE UNITED STATES BULGARIAN PROPERTY DEVELOPMENTS PLC ("Bulgarian Property Developments", "BPD" or "the Company") THE BOARD URGES SHAREHOLDERS NOT TO ACCEPT THE WINDSORVILLE OFFER In the document posted to shareholders today, the Board of BPD makes the following key points in urging shareholders to reject the bid from Windsorville Investments Limited ("Windsorville"): * The Windsorville Offer represents a discount to NAV of between 14.7 per cent. and 34.7 per cent. and, on a cash adjusted NAV basis, a discount of between 21.6 per cent. and 45.9 per cent. based on conservative property valuations * The Windsorville Offer of 64p . is clearly opportunistic . is below the price at which BPD Shares were trading in the first half of 2007 . is at a premium of just 13.3 per cent. to the lowest price at which BPD Shares traded in 2007 AND SHOULD BE REJECTED AS IT MATERIALLY UNDERVALUES THE COMPANY * A general meeting of Shareholders to be convened to approve the strategy for the return of up to 32p per BPD Share in cash to Shareholders as soon as possible, following which the Board estimates BPD will have a NAV of 49p per share, including some 22p in cash (for further details see "Cash Returns" below) Christian Williams, the Chairman of Bulgarian Property Developments, commented: "The Colliers CRE valuation, adjusted for cash and other assets and liabilities, results in a NAV on a Current Value basis of between 75p and 90p per BPD Share (depending on the outcome of an application for an increase in density at the Sofia Central Commercial Site) and of between 84p and 98p per share on a discounted Gross Development Value basis (as set out in the preliminary announcement dated 27 November 2007). These figures reflect the fact that the Company has cash balances of approximately £26 million (equivalent to 24p per share). "It is clear that the offer of 64p per share significantly undervalues BPD Shares. The Board firmly believes that the offer from Windsorville should be rejected and that the Board and the management team should be allowed to continue with the policies which it has implemented since the flotation in 2005, which have resulted in a significant increase in the asset base of the Company." Enquiries: Bulgarian Property Developments Ivo Hesmondhalgh (Chief Executive) +44 (0) 7968 703 395 Keith Springall (Finance Director) +44 (0) 7973 177 095 Matrix Corporate Capital LLP (Nominated Adviser) Stephen Mischler +44 (0) 20 7925 3388 Fairfax I.S. PLC (Adviser and Broker) Simon Stevens +44 (0) 20 7598 4034 Cubitt Consulting Simon Brocklebank-Fowler +44 (0) 20 7367 5100 Brian Coleman-Smith James Verstringhe Dealing Disclosure Requirements Under the provisions of Rule 8.3 of the Takeover Code (the 'Code'), if any person is, or becomes, 'interested' (directly or indirectly) in 1 per cent or more of any class of 'relevant securities' of BPD, all 'dealings' in any 'relevant securities' of that company (including by means of an option in respect of, or a derivative referenced to, any such 'relevant securities') must be publicly disclosed by no later than 3.30 pm (London time) on the London business day following the date of the relevant transaction. This requirement will continue until the date on which the offer becomes, or is declared, unconditional as to acceptances, lapses or is otherwise withdrawn or on which the 'offer period' otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an 'interest' in 'relevant securities' of BPD, they will be deemed to be a single person for the purpose of Rule 8.3. Under the provisions of Rule 8.1 of the Code, all 'dealings' in 'relevant securities' of BPD, or by any of their respective 'associates', must be disclosed by no later than 12.00 noon (London time) on the London business day following the date of the relevant transaction. A disclosure table, giving details of the companies in whose 'relevant securities' 'dealings' should be disclosed, and the number of such securities in issue, can be found on the Takeover Panel's website at www.thetakeoverpanel.org.uk. 'Interests in securities' arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an 'interest' by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities. Terms in quotation marks are defined in the Code, which can also be found on the Panel's website. If you are in any doubt as to whether or not you are required to disclose a 'dealing' under Rule 8, you should consult the Panel. Responsibility Statement The Directors accept responsibility for the information contained in this document, except that the only responsibility accepted by them in respect of the information contained in this document relating to Windsorville and its connected persons, which has been compiled from published sources, is to ensure that such information has been correctly and fairly reproduced and presented. Subject as aforesaid, to the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of that information. BULGARIAN PROPERTY DEVELOPMENTS PLC THE BOARD URGES SHAREHOLDERS NOT TO ACCEPT THE WINDSORVILLE OFFER Background On 19 September 2007, Windsorville announced that it had acquired a stake of approximately 24.4 per cent. in BPD. Since that date it has continued to purchase BPD Shares in the market so that as at 4 January 2008 it held approximately 25.6 per cent. of the issued share capital of BPD. On 14 December 2007, Windsorville announced an unsolicited cash offer for the issued and to be issued share capital of BPD at a price of 64p for each BPD Share and on 24 December 2007 Windsorville posted its offer document. This offer has been made despite the Board having announced that, if an offer were to be made at that level, the Board would not be in a position to recommend any such offer as the Directors believed that it materially undervalued the Company. The letter posted to shareholders today sets out why the Board believes that the Windsorville Offer materially undervalues BPD and explains the Board's reasons for unanimously recommending that Shareholders reject this opportunistic offer. BPD BPD was floated on AIM in January 2005 to invest in commercial property development opportunities in Bulgaria. Since incorporation, BPD has raised approximately £61.5 million (before expenses). This money has so far been invested in 15 sites in and around the commercial centres of Bulgaria and one small residential site. The ability to identify and successfully purchase sites such as these is a key strength of the management team. Shareholders are no doubt aware that BPD currently has approximately £26 million of net cash. This should allow BPD to develop its existing portfolio of development stock in phases without having to rely on high levels of bank borrowing. Alternatively, it would allow BPD to purchase any properties that may be sold at fire sale prices. Valuation In light of a potential offer from Windsorville, the Board instructed Colliers, London, to conduct an independent valuation of BPD's existing portfolio on a number of different bases. The results of the valuation were summarised in BPD's preliminary announcement on 27 November 2007 of results for the year ended 30 June 2007 as follows: "Colliers' valuation as at 26 November 2007 resulting in: * Net Asset Value (''NAV'') of 75p per share on Current Value basis * NAV of between 84p and 88p per share on discounted Gross Development Value If successful, BPD's application for an increase in density at the Sofia Central Commercial site would result in: * NAV of 90p on Current Value basis * NAV of between 89p and 98p per share on discounted Gross Development Value basis." On 12 December 2007, Colliers published its valuation certificate as required under Rule 29 of the Code. This is reproduced in the document posted to shareholders and is available on request from Matrix Corporate Capital LLP on 020 7925 3388 or Cubitt Consulting on 020 7367 5100. On a Current Value basis, the Windsorville Offer Price of 64p per BPD Share shows a considerable discount to NAV per share of between 14.7 per cent. and 28.9 per cent. BPD currently has approximately £26 million in cash, equivalent to 24p per BPD Share. Windsorville, therefore, is effectively offering 40p per BPD Share for BPD's net assets (excluding cash) (''Adjusted Offer Price''). Stripping the cash out of the NAVs above ("Adjusted NAV") results in the following: Adjusted Adjusted NAV per Offer Price BPDBgarian Property Developments BPD Share discount to Adjusted NAV Adjusted NAV on Current Value basis (75p NAV per BPD Share less 24p cash per BPD 51p 21.6% Share) Adjusted NAV on discounted Gross Development Value ("GDV") (84p to 88p discounted GDV per BPD Share less 24p cash per BPD Share) 60p-64p 33.3% to 37.5% As a result of discussions which have been held with the Municipality of Sofia, the Board is confident that BPD's application for an increase in the density at the Sofia Central Commercial site will be successful, in which case the figures would be as follows: Adjusted Adjusted NAV per Offer Price Bulgarian Property Developments BPD Share discount to Adjusted NAV Adjusted NAV on CV basis (90p NAV per less 24p cash per BPD Share) 66p 39.4% Adjusted NAV on discounted GDV basis (89p to 98p discounted GDV per BPD Share less 24p cash per BPD Share) 65p-74p 38.5% to 45.9% Potential Valuation Upside The Board believes that Colliers has been conservative in a number of areas: Capital and rental uplift When calculating the GDVs of each of BPD's properties, Colliers has made various assumptions as to the time that each development will take, and in some cases these span up to six years, but has assumed that rents and capital values remain constant over the entire period. The Board believes that it would be reasonable to expect that both rents and capital values will rise over such a period, especially as the Bulgarian GDP is forecast to grow at between 4.7 and 6.2 per cent. per annum in the six years ending 31 December 2012. Portfolio uplift The Colliers valuation of BPD's current portfolio is simply the sum of the individual property valuations. It would take any developer a long period to put together a development portfolio such as BPD's and the Board, therefore, believes that many purchasers might be prepared to pay a premium to be able to purchase a single portfolio rather than having to accumulate sites over an extended period. Developer's profit The Board believes that Colliers, when valuing properties on a Current Value basis, has been conservative in the amount that it has assumed that any potential purchaser would require by way of developer's profits. In the case of the Sofia Central Commercial site, Colliers has assumed that a developer would require a developer's profit of 45 per cent. If a developer's profit of 30 per cent. is assumed, the Company's NAV would increase by Euros 11.5 million, equivalent to 7.6p per BPD Share. Management and Employees BPD has an excellent management team. Its strong local team allows it to source property opportunities that many other companies would find hard to locate, whilst its AIM quotation and the wide experience of the UK Directors (both non-executive and executive) ensure that the Company is run according to UK corporate governance standards. The Directors have noted the comments made by Windsorville regarding the Company's employees and that Windsorville intends that BPD will serve as a platform for further investment in the region and possibly for broader investment into Eastern Europe. The Bulgarian Market Bulgaria continues to offer attractive investment opportunities including: * High GDP growth prospects over the next few years: GDP is forecast to grow at between 4.7 and 6.2 per cent. per annum in the six years ending 31 December 2012, well ahead of Western Europe and most of its South Eastern European peer group. * Excellent growth prospects for the commercial property sector: the property market in Bulgaria is experiencing strong international investment interest, supported by its geographic location at the crossroads of Europe, the Middle East and Asia. Five out of ten Pan-European transport corridors pass through Bulgaria. This is being recognised by significant EU funded infrastructure investment of Euros 731.5 million on five infrastructure projects including a second bridge over the Danube near Vidin (where one of BPD's sites is located), the Sofia airport development, and upgrades to three of the Pan-European Transport corridors. * High rates of growth in personal disposable income: a steady increase in local wages is leading to an increase in disposable personal income which will support existing buoyant consumer spending. From January 2000 to June 2007, the average officially reported monthly wage has nearly doubled from Euros 102.5 to Euros 204. * Low taxes: corporation tax rates have fallen from 15 per cent. in 2006 to 10 per cent. in January 2007 and income taxes are set to decline from between 20 and 24 per cent. to a flat rate of 10 per cent. during 2008. * Significantly lower prime office rents: in Sofia prime office rents are between 12.5 per cent. and 56 per cent. lower than most capital cities in adjacent countries. The Board believes that all of these factors combine to make Bulgaria one of the more attractive commercial property investment opportunities in Europe and one in which BPD is a significant player. Share Price Outperformance In the 12 month period leading up to 18 September 2007, the date immediately prior to the commencement of the Offer Period, the Company outperformed the following indices: * UBS European Real Estate Index by 11 per cent.; * ABN Amro Eastern European Top 20 Index by 14.5 per cent.; and. * Bloomberg Eastern European Index by 6.0 per cent. Strong Fundamentals Many property companies have substantial leverage. A fall in property values has a much greater effect on the NAV of highly leveraged companies. For example, consider a company with a single property asset worth £100 funded as to £20 in equity and £80 in debt. Its NAV is £20 (£100 worth of property less £80 in debt). If property prices fell in value by 5 per cent. (to £95) the company's NAV would fall from £20 to £15 (£95 worth of property less debt unchanged at £80), a fall of 25 per cent. Contrast this with BPD, which has no net debt. In the same circumstances as described above its NAV would have fallen by only 5 per cent. Cash Returns The Company was set up for long term investment to generate returns from the development of properties in Bulgaria and the Board remains of the view that this is the optimal strategy. However, in light of both difficult market conditions for property companies generally and the fact that the Windsorville Offer values the Company at a substantial discount to the value of the Company's assets, the Directors have been considering how the Company could reconcile maximising long term shareholder value with providing significant cash returns in the nearer term. Accordingly, if the Windsorville Offer does not become unconditional the Board proposes to call a general meeting of the Company to approve the Board's strategy. Prior to convening the general meeting, the Directors will hold discussions with BPD's major Shareholders with a view to understanding their preferences and achieving a consensus as to the wishes of Shareholders. The two potential routes forward are either for the Company to continue with its existing strategy or to return some cash to Shareholders. The Board currently envisages that at the general meeting the resolutions to be proposed will include (i) a resolution to sell certain properties, most probably including the Sofia Central Commercial site once planning consent for increased density has been secured, and return the distributable profits which arise in cash to Shareholders and (ii) a resolution to apply to the Court to capitalise part of the Company's share premium account and return cash to Shareholders. It is the Board's current belief that these resolutions, if passed, should result in the return of up to 32p per BPD Share to Shareholders. The Directors believe that this would leave Shareholders with a company with a NAV of approximately £53 million (49p per share) of which some £24 million (22p per share) would be in cash, before taking account of cash balances invested in additional properties in the meantime. After such a return, the Company would remain a significant property development business in Bulgaria capable of developing and acquiring additional properties for the benefit of Shareholders. The Directors also believe that for a successful specialist group with an experienced management team, such as BPD, opportunities exist not only to acquire property assets at attractive values but also to act as a consolidator of other property businesses operating in Bulgaria. Conclusion The Board believes that Windsorville is taking advantage of the current weak state of the property sector (which has many companies trading at substantial discounts to published NAVs) to make an opportunistic offer for a cash rich company with a strong balance sheet and an extensive and valuable portfolio entering its development phase. The Directors, who have been so advised by Matrix and Fairfax, are firmly of the view that Shareholders would be best served by rejecting the Windsorville Offer and backing the Board to deliver superior value. Accordingly, the Directors unanimously recommend that Shareholders reject the Windsorville Offer as they will do in respect of their beneficial shareholdings amounting to, in aggregate, 512,002 BPD Shares, representing approximately 0.5 per cent. of the Company's issued share capital. In providing their advice, Matrix and Fairfax have taken into account the commercial assessments of the Board. DEFINITIONS "AIM" the market of that name operated by London Stock Exchange plc ''Board'' or ''Directors'' the board of directors of the Company whose names are set out in the document sent to shareholders today ''BPD Shares'' ordinary shares of 25p each in the capital of the Company ''Code'' the City Code on Takeovers and Mergers ''Colliers'' Colliers CRE, property valuers ''Current Value'' or ''CV'' Colliers' estimate, as at 12 December 2007, of the market value of a site in its current condition, on the basis that appropriate approvals for the proposed developments is received ''Fairfax'' Fairfax I.S. PLC, joint financial adviser to BPD ''GDP'' gross domestic product ''Gross Development Value'' or Colliers' estimate, as at 12 December 2007, "GDV" of the value of a development had it been completed and fully let ''Matrix'' Matrix Corporate Capital LLP, nominated adviser and joint financial adviser to BPD ''Offer Document'' the offer document issued by Windsorville in respect of the Windsorville Offer on 24 December 2007 ''Offer Period'' the offer period for the purposes of the Code, which commenced on 19 September 2007 ''Offer Price'' 64p per BPD Share ''sqm'' square metre ''Windsorville Offer'' the cash offer to acquire BPD made by Windsorville This information is provided by RNS The company news service from the London Stock Exchange END OUPIIFEALRIDIIT
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