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Citycon Oyj (“Citycon” or the “Company”) announced on 13 May 2014 that Citycon and CPP Investment Board European Holdings S.à r.l (“CPPIBEH”), a wholly owned subsidiary of Canada Pension Plan Investment Board, have on 12 May 2014 entered into an agreement on an overall arrangement whereby Citycon would strengthen its balance sheet by raising approximately EUR 400 million of new capital and CPPIBEH would become a significant strategic shareholder in Citycon. The arrangement consists of a directed share issue of approximately EUR 206.4 million to CPPIBEH as well as a subsequent fully underwritten rights issue of approximately EUR 196.5 million pursuant to the pre-emptive subscription right of the Company’s shareholders (together the “Transaction”). The Transaction was conditional on the granting of necessary authorisations and election of new Board members by an Extraordinary General Meeting (“EGM”) of Citycon. The EGM held on 6 June 2014 passed the necessary resolutions, including an authorisation for the Board of Directors of Citycon to decide on a directed share issue to CPPIBEH as well as a rights issue based on the pre-emptive subscription right of shareholders.
Directed share issue
The Board of Directors of Citycon has on 8 June 2014 decided on a directed share issue of approximately EUR 206.4 million based on the authorisation granted by the EGM on 6 June 2014 (the "Directed Share Issue"). Citycon will offer 77,874,355 new shares (“Directed Issue Shares”) to CPPIBEH in deviation from the shareholders’ pre-emptive subscription right. The Directed Issue Shares represent approximately 17.6 per cent of the total number of shares and voting rights in the Company prior to the Directed Share Issue, and approximately 15.0 per cent of the total number of shares and voting rights in the Company after the Directed Share Issue.
The subscription price is EUR 2.65 per share. The subscription price has been agreed in negotiations between CPPIBEH and the Company and the Company believes that it represents a fair price in light of other equity issues in the real estate sector in Europe in the past and reflects the historical average trading prices of the Company over the last six (6) months. The subscription price is approximately 2.2 per cent lower than the closing price of the Company’s share on 12 May 2014, the date preceding the announcement of the Transaction, and approximately 1.7 per cent higher than the dividend adjusted volume-weighted average trading price of the Company’s share on NASDAQ OMX Helsinki Ltd. during the three (3) months preceding the announcement of the Transaction. The subscription price will be recorded in its entirety in the invested unrestricted equity fund of the Company.
CPPIBEH will subscribe and pay for the Directed Issue Shares and the Board of Directors of Citycon will approve the share subscriptions today, on 9 June 2014. The Directed Issue Shares will entitle their holder to full dividends declared by the Company, if any, and to other shareholder rights in the Company after the Directed Issue Shares have been registered with the Finnish Trade Register and recorded in the Company’s shareholders’ register, on or about 10 June 2014. Thus, the Directed Issue Shares will entitle CPPIBEH to participate in the rights issue described below, the record date of which is 12 June 2014. Following the registration of the Directed Issue Shares, the total number of shares outstanding in the Company will amount to 519,162,367 shares. In order to list the Directed Issue Shares, Citycon has prepared a prospectus that is expected to be approved by the Finnish Financial Supervisory Authority today, on 9 June 2014. Public trading in the Directed Issue Shares is expected to commence on or about 11 June 2014.
Rights issue
The Board of Directors of Citycon has on 8 June 2014 decided on a rights issue of approximately EUR 196.5 million based on the authorisation granted by the EGM on 6 June 2014 (the "Rights Issue"). Citycon will offer a maximum of 74,166,052 new shares (“New Shares”) in accordance with the shareholders' pre-emptive subscription right. The New Shares to be issued in the Rights Issue represent a maximum of approximately 14.3 per cent of the total shares and voting rights in the Company after the registration in the Trade Register of the Directed Issue Shares on or about 10 June 2014 and approximately 12.5 per cent of the total shares and voting rights in the Company after the Rights Issue assuming that the Rights Issue is subscribed in full.
CPPIBEH, who as a result of the Directed Share Issue will own 77,874,355 shares in the Company on the record date of the Rights Issue, and the two other largest shareholders of the Company, Gazit-Globe Ltd. and Ilmarinen Mutual Pension Insurance Company, have undertaken, subject to certain conditions, to subscribe for their respective pro rata share of the New Shares to be issued in the Rights Issue as follows: CPPIBEH 11,124,907 New Shares, Gazit-Globe Ltd. 31,082,098 New Shares and Ilmarinen Mutual Pension Insurance Company 5,659,341 New Shares. The three subscription undertakings represent in the aggregate approximately 64.5 per cent of the maximum amount of New Shares to be issued in the Rights Issue.
In addition, Gazit-Globe Ltd. and CPPIBEH (the “Underwriters”) have provided underwriting commitments according to which they commit, subject to certain conditions, to underwrite the Rights Issue up to an aggregate subscription price of EUR 42.6 million and EUR 27.1 million, respectively (less the subscription price for any New Shares potentially subscribed for in the secondary subscription). The underwriting by CPPIBEH will only apply to New Shares to be issued in the Rights Issue that may remain unsubscribed for after the underwriting commitment provided by Gazit-Globe Ltd. has been used in full.
The subscription price for the New Shares is EUR 2.65 per New Share. The subscription price is the same as in the Directed Share Issue. The subscription price will be recorded in its entirety in the invested unrestricted equity fund of the Company.
The subscription period begins on 17 June 2014 at 9:30 a.m. (Finnish time) and ends on 2 July 2014 at 4:30 p.m. (Finnish time). Shareholders of the Company who are registered in the shareholders’ register maintained by Euroclear Finland Ltd. on the record date of 12 June 2014, shall automatically receive one (1) freely transferable subscription right (“Subscription Right”) in the form of a book-entry for every one (1) share owned on the record date. Each seven (7) Subscription Rights will entitle their holders to subscribe for one (1) New Share. Trading in the Subscription Rights on NASDAQ OMX Helsinki Ltd will commence on 17 June 2014 at 9:30 a.m. (Finnish time) and end on 25 June 2014 at 6:30 p.m. (Finnish time). Further, a shareholder or other investor, including any of the Underwriters, who has subscribed for New Shares based on the primary subscription right, is entitled to subscribe for New Shares not subscribed for by virtue of the primary subscription right in the secondary subscription.
The ex rights date for the Rights Issue is on 10 June 2014. The prospectus for the Rights Issue is expected to be published on or about 13 June 2014.
Citycon will announce the final result of the Rights Issue through a stock exchange release on or about 8 July 2014. Public trading in the New Shares subscribed for in the Rights Issue based on the primary subscription right as interim shares is expected to commence on or about 3 July 2014. The interim shares will be combined with the existing shares of the Company on or about 9 July 2014 and public trading in the New Shares is expected to commence on or about 10 July 2014. The full terms and conditions of the Rights Issue are set out in the appendix to this release.
Pohjola Bank plc is acting as the lead manager of the Rights Issue (the “Lead Manager”).
Citycon has entered into a lock-up agreement with the Lead Manager under which it has, subject to certain exceptions, agreed not to issue or sell any shares in Citycon for a period ending 180 days after the closing of the Rights Issue. The Company has also on 12 May 2014 entered into a lock-up agreement with CPPIBEH under which it has, subject to certain exceptions, agreed not to issue or sell any shares in Citycon for a period ending 270 days after the date of the Rights Issue prospectus. CPPIBEH has also agreed on a lock-up under which it has, subject to certain exceptions, agreed not to sell or transfer any shares in Citycon for a period ending 270 days after said date.
Use of proceeds
The Company intends to use the proceeds of the Directed Share Issue and Rights Issue to make an approximately EUR 300 million debt repayment thereby further deleveraging the Company’s balance sheet and giving it the freedom to recycle capital accretively by pursuing select acquisitions and (re)development projects of supermarket-anchored shopping centres in dense urban locations in the Nordic and Baltic regions as well as proactive asset management and other value-added activities. The Directed Share Issue enables the Company to raise large amount of equity capital within a short timeframe and on terms deemed more favourable than those which might have been achieved through a standard equity issue. The Company believes that the addition of a globally recognised real estate investor as one of its strategic shareholders will also increase Citycon’s profile as a shopping centre industry leader, which should enhance the Company’s attractiveness to investors. In addition, the agreement entered into between CPPIBEH and Gazit-Globe Ltd. in connection with the Transaction on the parties’ objectives in certain governance matters relating to the Company should further enhance the Company’s corporate governance structure to reflect the highest international market standards. There are, therefore, weighty financial reasons from the Company’s perspective for deviating from the pre-emptive subscription rights of the shareholders in the Directed Share Issue. In addition, the Company’s shareholders are offered the possibility to invest in the Company at the same subscription price through the subsequent Rights Issue.
Adjustment to the EPRA Earnings and EPRA EPS (basic) outlook based on the Transaction
According to the outlook announced by Citycon on 24 April 2014, the Company forecasted its EPRA Earnings to increase by EUR 2 to 10 million in 2014 compared to 2013 and its EPRA EPS (basic) to be EUR 0.20-0.22 in 2014 based on the existing number of shares. Following the Transaction impacting both earnings and number of shares, Citycon adjusts the EPRA Earnings and EPRA EPS (basic) forecasts. Assuming that the Directed Share Issue is completed and the Rights Issue is subscribed in full, Citycon now forecasts that its EPRA Earnings will increase by EUR 7 to 15 million and its EPRA EPS (basic) will be EUR 0.175-0.195 based on the existing property portfolio and the increased number of shares after the completion of the Transaction.
Adjustment of the terms and conditions of the 2011 stock options
In order to ensure the equal treatment of shareholders and the holders of the Company’s 2011 stock options, the Board of Directors of the Company has on 8 June 2014, due to the Rights Issue, adjusted the subscription ratio and the subscription price of the 2011 stock options in accordance with the terms and conditions of the 2011 stock options. Provided that the Directed Share Issue is completed and the Rights Issue is executed in full as described in the terms and conditions of the Rights Issue, the subscription price for stock options 2011A—D(I) shall be adjusted to EUR 2.7820 per share and the subscription ratio to 1.3446. As regards stock options 2011A—D(II), the subscription price shall be adjusted to EUR 2.8862 per share and the subscription ratio shall be adjusted to 1.3446. As regards stock options 2011A—D(III), the subscription price shall be adjusted to EUR 2.3804 per share and the subscription ratio shall be adjusted to 1.3446.
The total amount of shares is rounded down to full shares in connection with the subscription of the shares and the total subscription price is calculated using the rounded amount of shares and rounded to the closest cent. Due to the above adjustments, the adjusted maximum total number of shares to be subscribed for based on the 2011 stock options shall be 9,748,350.
The foregoing adjustment to the terms and conditions of the 2011 stock options due to the Rights Issue will be effective as of its registration in the Trade Register on or about 9 July 2014, provided that the Rights Issue is executed in full as described in the terms and conditions of the Rights Issue. The 2011 stock options do not entitle their holders to participate in the Rights Issue.
Helsinki, 9 June 2014
CITYCON OYJ Board of Directors
APPENDIX: Terms and conditions of the Rights Issue
For further information, please contact:
Marcel Kokkeel, CEO Tel. +358 20 766 4465 marcel.kokkeel@citycon.com
Eero Sihvonen, Executive VP and CFO Tel +358 20 766 4459 eero.sihvonen@citycon.com
Distribution: NASDAQ OMX Helsinki Major media www.citycon.com
DISCLAIMER
This stock exchange release is not an offer for subscription for shares in the Company. A Finnish prospectus relating to the rights issue referred to in this stock exchange release and the subsequent listing of the new shares at NASDAQ OMX Helsinki Ltd. will be published once the Finnish Financial Supervisory Authority has approved it.
In particular, the information contained herein is not for publication or distribution, directly or indirectly, in or into the United States, Canada, Australia, Hong Kong, South Africa or Japan, unless the Company in its sole discretion determines otherwise. These written materials do not constitute an offer of securities for sale in the United States, nor may the securities be offered or sold in the United States absent registration or an exemption from registration as provided in the U.S. Securities Act of 1933, as amended, and the rules and regulations thereunder. The Company does not intend to register any portion of the offering in the United States or to conduct a public offering of securities in the United States.
The issue, exercise and/or sale of securities in the offering are subject to specific legal or regulatory restrictions in certain jurisdictions. The Company and Pohjola Bank plc assume no responsibility in the event there is a violation by any person of such restrictions. Pohjola Bank plc is acting exclusively for the Company and no one else in connection with the rights issue and will not regard any other person (whether or not a recipient of this presentation) as its client in relation thereto and will not be responsible to anyone other than the Company for providing the protections afforded to its clients, nor for giving advice in relation to the rights issue or any arrangement referred to herein.
The information contained herein shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the securities referred to herein in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, exemption from registration or qualification under the securities laws of any such jurisdiction. Investors must neither accept any offer for, nor acquire, any securities to which this document refers, unless they do so on the basis of the information contained in the applicable prospectus published or offering circular distributed by the Company.
The Company has not authorized any offer to the public of securities in any Member State of the European Economic Area other than Finland. With respect to each Member State of the European Economic Area other than Finland and which has implemented the Prospectus Directive (each, a “Relevant Member State”), no action has been undertaken or will be undertaken to make an offer to the public of securities requiring publication of a prospectus in any Relevant Member State. As a result, the securities may only be offered in Relevant Member States (a) to any legal entity which is a qualified investor as defined in the Prospectus Directive; or (b) in any other circumstances falling within Article 3(2) of the Prospectus Directive. For the purposes of this paragraph, the expression an “offer of securities to the public” means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to exercise, purchase or subscribe the securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.
This communication is directed only at (i) persons who are outside the United Kingdom or (ii) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) and (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2) of the Order (all such persons together being referred to as “relevant persons”). Any investment activity to which this communication relates will only be available to and will only be engaged with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.
