Colonial stock plummets as takeover bid fails to appear

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The share price of Colonial plunged on Monday as doubts arose as to whether a takeover bid for the debt-laden Spanish property company would emerge.

11 March 2008

MADRID - The share price of Colonial plunged on Monday as doubts arose as to whether a takeover bid for the debt-laden Spanish property company would emerge.

The stock closed down 15.52 percent at EUR 0.98 after reaching a low of EUR 0.96 on a volume of 35 million shares. Colonial's market valuation has fallen by over 46 percent since the start of this year.

Sovereign wealth fund Investment Corporation of Dubai resumed talks on 4 March with core Colonial shareholders Luis Manuel Portillo and real estate firm Nozar with a view to acquiring their combined 51-percent stake, a move that would trigger a full mandatory bid.

In another development, which emerged last Friday, news broke that a creditor of Nozar, which holds a 12.2-percent interest in Colonial, has filed a suit with a Madrid court seeking to have the real estate firm declared insolvent.

In its suit, the company Avaltransa claims that the Colonial shareholder had debts totalling more than double its shareholder funds.

The Dubai fund last month made a cash and securities bid for Colonial at EUR 1.85 per share but failed to reach an agreement with Nozar and Portillo. At least half of the amount was to be paid in securities with a maturity of four-and-a-half years.

Colonial estimates the company has a net asset value of EUR 2.35 per share. However, the company is saddled with debt of about EUR 9 billion at a time when the global credit crunch has sharply pushed up refinancing costs.

[Copyright EL PAÍS / ADRIAN SOTO 2008]

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