The exchange of material facts between Aliansce and BR Malls was so fast that it sounded like a combination, but people close to the companies guarantee that it surprised the administrations. Aliansce released the details of the merger proposal made to BR Malls at dawn and the company responded this morning rejecting the offer, after an extraordinary board meeting called at 8 am.
Aliansce defended a merger of equals, with a shareholding composition of 50% each in the resulting company and a cash payment of R$ 1.35 billion to the shareholders of BR Malls. BR Malls’ official message was short and to the point, saying that the proposal considerably understates the fair economic value of the company and its asset portfolio. What the company did not write there is that it did not understand the offer as a merger nor does it see itself as an equal when looking at Aliansce.
Shopping Estação, in Curitiba: BR Malls assesses that its portfolio would include 7 of the 10 main assets of the new company — Photo: Reproduction
The deconstruction of the merger concept in the board was made from the formation of a reference group of shareholders in the new company, with 24.5% (the current controllers of Aliansce). Today, the largest shareholder of BR Malls does not reach 10%. As Aliansce would have four of the nine seats on the board, the interpretation is that this group would have strong representation on the board, being able to exercise control in practice.
- Aliansce proposes ‘fusion of equals’ to BR Malls
In this composition, the understanding is that there should be a premium and that this also does not happen in the cash portion in the amount that the company understands to be necessary. BR Malls is uncomfortable with making a transaction taking current prices as its fair value. BR Malls stock is 15% above its historic low and 57% below its high. Analysts point to an average upside of 49%.
The analyzes carried out by the advisors and internal teams to support the rejection of the proposal, found Pipeline, highlighted that the sale per m2 is 14% higher than that of Aliansce, the rent per m2 17% higher and the net operating profit 27% higher. Also in this analysis, the conclusion is that of the 10 main malls of the resulting company, BR Malls would enter with seven.
The proposal had been on the table since January 4th and the companies had been talking about it. People close to BR Malls guarantee that the price was immediately considered low, but that the company evaluated the other points, such as operational and financial synergies and final governance.
BR Malls, naturally, wants to raise its appraisal value, an expected move in the face of an unsolicited first offer. The market’s bet is that Aliansce has also saved some premium for a counter-offer, as usual in this type of negotiation. “Only if this sleeve is very long”, says a source on the other side.
There is also the possibility of an interested third party entering the dispute. As it does not have a controller, BR Malls is more exposed to third-party approaches – last year, the manager Suno’s proposal was for a spin-off of assets in real estate funds, which the company did not accept.
In the scenario of potential premium increase, BR Malls shares rose 3.2%. Aliansce fell 0.2%.