by
Wilhelm Rasinger
12.03.2014

Rasinger: BUWOG becomes independent

14 March is the date: an extraordinary general meeting of IMMOFINANZ will be asked to approve the spin-off of BUWOG. The commentaries on this transaction are reserved positive. From a strategic standpoint, it certainly makes sense to list the rather low-risk residential segment in Austria and Germany in a separate unit.The Immofinanz share currently trades at a discount of one-third to the net asset value: the share price is roughly € 3.6 and the NAV € 5.5. The hope is that the BUWOG segment will be given a lower discount of only 10 to a maximum of 20 per cent and the rather high discount for Immofinanz will not increase further.

Plans call for the distribution, free of charge, of one BUWOG share for every 20 Immofinanz shares. The expected result is a decline in the Immofinanz NAV and, most likely also, in the share price. This transaction will not make the Immofinanz shareholder richer or poorer for the time being, but it is expected that the Immofinanz shares and BUWOG shares in total will create added value for the shareholders.

The following simplified example, which is based on the actual situation, should explain the above points:

• BUWOG will have almost 100 million shares: nearly half will go to Immofinanz shareholders and IMMOFINANZ will hold the rest for now. Immofinanz’s equity will decline by roughly 15 per cent. The theoretical discount will equal € 0.8 from the NAV and € 0.5 from the share price.
• BUWOG’s NAV will then equal roughly € 16 and the share price € 10.
• Check: starting position 20 x € 3.60 = € 72; after the spin-off 20 x € 3.10 plus 1 x € 10 also equals € 72.
• If the discount to the NAV for BUWOG falls to 20 (10) per cent, the theoretical price of the BUWOG share would be € 12.8 (€ 14.4), and the value would increase from € 72 to € 74.8 (€ 76.4). Excluding the related expenses, the spin-off would bring an increase of roughly 4 (6) per cent under the assumptions in this example.

Both stocks should see better development over the medium- to long-term under a separate and independent BUWOG structure, despite somewhat higher costs.

Huge increases are not to be expected, but the perspectives are estimated as positive. Therefore, IVA approves this transaction in spite of the not insignificant, non-recurring costs.