Current report 16/2020 of 28 February 2020

Preliminary agreements to acquire BUMA Group’s operating businesses

The Management Board of REINO Capital SA (“Issuer,” “Company”) hereby discloses inside information on the execution on 28 February 2020 by a subsidiary of the Issuer – REINO SuppCos Sp. z o.o.  (“REINO”) – and RF CorVal International Holdings Limited (“RF CorVal”), together “Buyers,” of a preliminary agreement to purchase a 100% stake in BUMA Group’s operating companies, along with associated agreements, including an agreement to purchase the BUMA trademark and an agreement to purchase loan-related debt.

The subject of the transactions covers shares in the following companies: BUMA Contractor 1 Sp. z o.o. (general contractor), FM Solutions Sp. z o.o. (facility manager), BUMA Service Sp. z o.o. (property manager), along with subsidiary BUMA Centrum Sp. z o.o. (accounting services), BUMA Nieruchomości 1 Sp. z o.o. (marketing and commercialisation) and BUMA Sp. z o.o. (project manager in property development projects).

Under the agreement, each of the Buyers will purchase a 50% stake in the aforementioned companies. Relations between the Buyers as regards ownership of the acquired entities are determined in the Strategic Partnership Umbrella Agreement disclosed by the Issuer in current report 34/2019.

Executing the preliminary agreements is the effect of negotiations held since July 2019 based on a letter of intent specifying the key rules for the acquisition of a holding being part of BUMA Group, as communicated by the Issuer via current report 27/2019.

The preliminary agreements stipulate that final agreements for the acquisition of the operating companies will be subject to agreements transferring shares in special-purpose vehicles and ownership of the properties being executed, as results from the preliminary agreements disclosed by the Issuer in current report 11/2020.

The preliminary agreements also include a condition precedent in line with which the Buyers must obtain approval for the acquisition from the bank providing credit to the operating companies (standard “change of control” procedure).

Risks related to the transaction are mitigated by a representations and warranties insurance and a share ownership insurance. Insurance policies confirming this were issued on the transaction date. Similar policies related to the acquired assets were issued in the preceding period, which meets a condition precedent in the agreements disclosed by the Issuer in current report 11/2020.

The Issuer and RF CorVal are required to jointly pay a contractual penalty of EUR 1 million if the final share sale agreement is not executed for reasons attributable to either of these entities. An equivalent of the contractual penalty is deposited, in equal proportion by the Issuer and RF CorVal, in a notary’s deposit account, and this deposit will be credit against the price for shares in the acquired companies. 

The total price for the shares in the acquired companies is EUR 13 640 000, which constitutes the equivalent of the net assets of the acquired companies in an agreed formula. In accordance with the price setting mechanism, this corresponds to the value of cash held by the companies, plus the value of net receivables (receivables less payables). In other words, the price corresponds to the value of cash in bank accounts and receivables less payables, which in a normal trade cycle will convert into cash, hence they can be treated as a cash equivalent.

The total price may be increased if the balance of cash and net receivables increases at the closing date.

REINO will be required to pay 50% of the price referred to above. The investment will be financed with funds raised by the Issuer.

The total annual revenue of the acquired companies in recent years averaged approx. PLN 300 million. In line with business assumptions and best knowledge of the circumstances and business arrangements, the acquired companies will provide services to special-purpose vehicles held by funds and investment vehicles created with the Issuer’s participation. In the case of REINO RF CEE Real Estate Fund and the land bank being acquired from BUMA Group, this represents contracts for a period of at least three years.

Given the above, it can be stated that the accumulated revenue of the acquired companies can reach PLN 1.5 billion over the next three years, i.e. approx. PLN 0.5 billion per year. In this scenario and for the above estimates, the Issuer’s share of revenue annually would average over PLN 250 million.

At the same time, based on a separate agreement, REINO undertook to purchase stakes in BUMA Factory Sp. z o.o. and BUMA Hala Sp. z o.o., along with all rights and obligations of the general partner in BUMA Factory Sp. z o.o. spółka komandytowa. Other companies include a façade manufacturer and a company that owns the property where the BUMA Factory is located. The total price for the rights acquired equals EUR 974 000 and will be reduced by the net value of receivables concerning loans granted within BUMA Group. The investment will be financed with funds raised by the Issuer.

The agreement includes a condition precedent in line with which the buyer must obtain approval for the acquisition from the bank providing credit to the operating companies.

The aforementioned final agreements should be executed by 30 June 2020.

The Issuer is required to jointly pay a contractual penalty of EUR 0.5 million if the final share sale agreement is not executed for reasons attributable to the Issuer and despite the other final agreements being executed.

The Issuer considers the above information as confidential due to the transaction’s critical importance to the development of the Issuer’s Group as a holding encompassing real-estate service providers, along with potential increase in share price and potential dividends resulting from implementing the transactions.

Legal basis:

Art. 17 sec. 1 MAR – inside information.

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REINO Capital is a listed holding company that owns a group of entities engaged in investments and fund management on the commercial property market.

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