French REIT Foncière des Régions (FdR) has pulled the plug on its plan to merge with smaller peer Foncière Paris France (FPF) due to volatile market conditions.
In a statement ahead of an extraordinary general meeting scheduled for Monday afternoon, FdR said a merger still made sense from a property perspective. However, market conditions had affected the value of the financial instruments that were to be swapped by Fonciere Paris France with FdR shares.
The announcement comes as a surprise to the market, which had not expected the recent financial markets turbulence to derail the merger. In fact, shares in FdR have remained stable in the past three weeks, after plunging 18% at the end of July. 'More than the drop in the share price, the stumbling block has been the much larger change in value of the equity warrants and convertible bonds that were part of the deal,' Philippe Le Trung, head of FdR's investor relations told PropertyEU, adding that the companies have been in discussions for the past week but were not able to reach a new agreement. 'This is a missed opportunity,' he added.
FdR will continue to look for opportunities that will enable it to pursue its strategy aimed at consolidating its status as the leading office REIT in Europe, it added.
FdR had initially hoped to gain full operational control of FPF through the launch of a full offer planned for October. In July, the company announced it had agreed to exchange shares and debt with four sets of investors representing around 27% of Foncière Paris France's share capital (37% of diluted capital). It subsequently planned to launch a full offer to the remaining shareholders at the same terms which would value the FPF shares at EUR 132, and the entire company at roughly EUR 460 mln.
The merger was to be voted on during an extraordinary general meeting on 5 September and required the approval of two-thirds of the assembly.
FdR's shares were down 4.5% to EUR 54.85 per share following the announcement.
Read more on the planned merger in the September edition of PropertyEU Magazine. Click on the link below to subscribe | 
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