(Adds interview with Gazit Globe chairman, share reaction)
By Tova Cohen
TEL AVIV, July 23 (Reuters) - Israeli real estate developer Gazit Globe has agreed to buy the 40% of Atrium European Real Estate it does not already own, betting on growth in densely populated urban areas of Eastern Europe.
Gazit Globe will pay 565 million euros ($632 million), or 3.75 euros per share, in cash, an 18% premium to Atrium’s closing price on Monday and a 13% premium to the average price of the past 90 days.
“We think it’s a good opportunity,” Chairman Chaim Katzman told Reuters on Tuesday, noting the negative sentiment towards real estate stocks in Europe.
Atrium shares reversed a year-long decline of 16% on news of the deal, while shares in Gazit Globe, which has held a controlling stake in Atrium since 2008, were up 9.5 percent in Tel Aviv.
“It’s the right price, the right product, we are very liquid and we have the resources to easily handle it,” Katzman said.
Atrium owns 33 income producing assets valued at 3 billion euros, most of which are located in Poland and the Czech Republic, particularly in the capital cities Warsaw and Prague. The deal is expected to close in January, when Atrium will be delisted from the Vienna stock exchange and Euronext Amsterdam.
As part of the arrangement, Gazit Globe, which earlier this year sold most of its holdings in Canada’s First Capital Realty , said it would sell a 12% stake in Atrium to Israeli insurer Menora Mivtachim Holdings for 150 million euros.
Atrium plans to distribute a special dividend of 0.6 euros per share before the deal closes, reducing the price paid by Gazit Globe by an equal amount.
Buying the remainder of Atrium will boost Gazit Globe’s privately-held assets by 2.7 billion euros. Funds from operations - a measurement of cash flow - are expected to increase by 85 million shekels ($24 million) to 670 million shekels next year.
Atrium has seven weeks to solicit other bids, meaning the board could retract its recommendation of the Gazit Globe deal, subject to paying Gazit Globe a breakup fee of 10 million euros. ($1 = 0.8937 euros) ($1 = 3.5322 shekels) (Reporting by Tova Cohen; editing by Jason Neely and Kirsten Donovan)