Supermarket group Casino has filed a prospectus with the French securities regulator enabling the float of its retail property subsidiary Mercialys to go ahead.
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Announced by Casino on 22 April, the IPO process has now entered a new phase, which should enable Mercialys to carry out its initial public offering in the fourth quarter, Groupe Casino said. At that time, the company will opt for the tax regime applicable to a French Société d’Investissement Immobilier Cotée (SIIC).
Mercialys’ assets comprise a portfolio of premium quality shopping centres, most of which are adjacent to hypermarkets and supermarkets owned by Groupe Casino.
The assets represent a total of 147 locations, based in the French regions enjoying the country’s fastest population growth. They total around 547,000 square metres of gross leasable area, with an appraised value, including transfer fees, of €957.5m (US$1.168bn) as of 30 June 2005. According to the company’s pro forma IFRS financial statements, rental revenue totalled €66.9m in the year ended 31 December 2004, with cash flow of €58.7m.
The listing of the dedicated subsidiary is designed to help, develop and promote the major business of creating, acquiring and enhancing the value of shopping centres. Casino will retain a majority interest in Mercialys post-IPO, thus giving the subsidiary privileged access to the group’s new shopping centre developments. Mercialys plans a retail property investment programme that will be financed, in particular, by a €200-230m capital increase at the time of the IPO.
The listing is timed to take advantage of new French tax regulations regarding transfers of real estate assets and will result in the payment by Casino of an exit tax in 2006. Subsequently, as an SIIC property company, Mercialys will not be liable for corporate income tax as long as it pays out in dividends at least 85% of its income from rental activities. The IPO will also enable Casino to increase its shareholders’ equity and reduce its debt, while retaining control over the retail property business and providing the business with the resources needed to drive growth. Groupe Casino has confirmed that it will retain ownership of its hypermarket and supermarket properties, which are not being transferred to Mercialys.
Through Vendôme Commerces, the dedicated investment fund of the Axa Group insurance companies, Axa is contributing retail property assets worth €61m (including transfer fees) to Mercialys as part of the IPO process, and will subsequently own a 6.5% interest in the new company. Axa has also committed to increasing its stake by at least €25m during the IPO, and has a seat on the Board.
The exact terms and timing of the IPO are subject to market conditions and the usual authorizations, and will be released at a later date.
