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  • Genova makes a strategic company acquisition in Western Sweden – acquires 50 percent of Järngrinden and intends to finance the acquisition partly by a directed share issue of ordinary shares

Genova makes a strategic company acquisition in Western Sweden – acquires 50 percent of Järngrinden and intends to finance the acquisition partly by a directed share issue of ordinary shares

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  • Genova Property Group AB (publ) ("Genova") acquires 50 percent of the shares in the property management and development company Järngrinden AB ("Järngrinden") for 562.5 MSEK, of which 275 MSEK will be paid through a capital injection in the form of a new share issue in Järngrinden and 287.5 MSEK in the form of a direct acquisition from the current principal shareholders of Järngrinden, including two options to acquire an additional 50 percent of the shares within five to seven years respectively (the "Acquisition").
  • Järngrinden will use the capital injection to increase the pace of property development as well as acquisition of new investment properties.
  • The property value in Järngrinden amounts to around 500 MSEK. The properties are primarily located in Western Sweden, including the Gothenburg region, and the property development portfolio includes almost 100,000 square meters of living space distributed on almost 1,700 rental apartments and residential condominiums.
  • Through the acquisition, Genova is establishing itself as a relevant player in Western Sweden, including the Gothenburg region, and acquires a well-functioning platform with good prospects of future growth in Western Sweden.
  • Genova intends to carry out the Acquisition through a combination of available funds and a directed share issue of around 2.25 million ordinary shares.
  • Genova hereby announces its intention to, with deviation from the shareholder's preferential rights, carry out a new share issue directed to Swedish and international institutional investors through an accelerated book-building procedure, which is to commence immediately, and have for this reason engaged Carnegie Investment Bank AB (publ) ("Carnegie") and Swedbank AB (publ) ("Swedbank") to investigate the possibility to carry out the directed new share issue.

Background to the Acquisition

Genova has during the last ten years evolved to become a listed investment property and property development company with a focus on community service properties and residential units mainly in the Greater Stockholm area and Uppsala Region, with the business model to combine stable cash flow from the commercial property portfolio with value creating property development of mainly community service properties and residential units for the Company's own long term property management.

As Genova has grown, it has complemented its portfolio with properties on its main markets with investment properties and building rights in other growing cities in Sweden, such as Lund and Borås where Genova in 2016 created a joint venture with Järngrinden in conjunction with the acquisition of the property Gulmåran 7.

Through the Acquisition of 50 percent of Järngrinden, Genova acquires an experienced organisation, with a cash flow generating property portfolio as well as an investment property portfolio in Western Sweden, including the Gothenburg region2, which is very well suited for the Company and contributes to the fulfilment of the operative and financial targets of Genova. In addition, Genova acquires an attractive platform which creates possibilities for future growth and increased presence in Western Sweden.

With Genova's capital injection of 275 MSEK to Järngrinden, in combination with Järngrinden's experienced organisation and knowledge of the market, the opportunity is created to

scale up the ambitions and pace of property development. Hereby, the opportunity is created to increase mainly the proportion of rental housing which are developed for the Company's own long term management. 

Michael Moschewitz, CEO at Genova

"Through the acquisition, Genova makes a strategic establishment in Western Sweden which complement our main markets in the Greater Stockholm area and Uppsala Region. I and Genova's founders know Patrik Ivarson and Järngrinden since a long time and we share common values and future ambitions. The acquisition also creates a platform for growth in western Sweden and opportunities for Järngrinden to increase its growth rate."  

Patrik Ivarson, CEO at Järngrinden

"We have had good cooperation with Genova and the people there since many years and it feels both exciting and secure to, together with them, increase the pace and the scale of the business. It is with great energy that I will continue to contribute to the continued development of Järngrinden now when we are entering an expansive phase."

Järngrinden in short

Järngrinden is an investment property and property development company which focuses on development of both residential condominiums and rental apartments as well as property management. The company works with property development throughout the chain, from the purchase of the land, through the zoning plan process to the construction and, when applicable, the divestment. The company is active in Western Sweden with its seat in Borås. Järngrinden has a total of 14 employees, of which 9 are active in the property development.

The founders of Järngrinden have since the establishment of the company in 1981 conducted business within construction and investment properties. In 2004, the company established a property development business in Western Sweden. In 2013, the construction business was sold to what is now the listed company Wästbygg. In the property development business, Järngrinden is mainly active in Gothenburg, Borås, Kungsbacka, Varberg, Halmstad, Helsingborg and Malmö with surroundings.

Järngrinden has during the years completed approximately 2,000 residential units, of which 1,400 are residential condominiums and 600 are rental apartments. Through the capital injection it is deemed that the number of residential units in current ongoing production may be significantly increased from todays around 400 residential units. The property development portfolio consists of almost 100,000 sqm of living space distributed on almost 1,700 residential units, of which 55 percent are residential condominiums and 45 percent are rental apartments, where a considerable amount already have adopted zoning plans. Estimated investment volume in the property development portfolio is around SEK 3.9 billion with an estimated value of around SEK 4.7 billion when completed.

The value of Järngrinden's shares in the wholly and partly owned real estate portfolio is around 500 MSEK, of which the biggest portion consists of commercial properties in Borås with accompanying land. The rental value on a yearly basis amounted to 31 MSEK and the operating surplus amounted to 22 MSEK.

The seller's advisor in the transaction has been Catella Corporate Finance.

The Acquisition in short

Genova acquires 50 percent of the shares in Järngrinden for a cash consideration of 562.5 MSEK, of which 275 MSEK derives from new share issues in Järngrinden in a new share issue to Genova and 287.5 MSEK in the form of a direct acquisition from the current principal shareholders of Järngrinden. Closing of the acquisition of the new shares is planned to take place on 28 October 2021 and no material conditions for closing exists.

In addition to acquiring 50 percent of the shares in Järngrinden, Genova receives a call option to acquire an additional 50 percent of the shares in Järngrinden from the seller. The option is divided so that Genova can acquire 50 percent of the seller's shares (i.e., 25 percent of the shares in Järngrinden) during September 2026 and the remaining 50 percent of the seller's shares during September 2028. If Genova does not exercise the first call-option it will have the possibility to acquire 100 percent of the seller's shares (i.e., the remaining 50 percent of the shares in Järngrinden) during September 2028. If Genova does not exercise the call options in accordance with the above, the seller will have the right to, during October 2028, in written form, demand that Genova acquires 50 percent of the seller's shares (i.e., 25 percent of the shares in Järngrinden). If the call and put options above do not result in Genova's acquisition of all shares in Järngrinden, both Genova and the seller have the right to, during September 2031, demand that Genova acquires all the seller's shares in Järngrinden (i.e., a mutual option).

The price for the shares that Genova acquires under the options (regardless who exercise the options), shall be calculated on the same principle as the initial 50 percent and be decided based on a company value calculated based on Järngrinden's consolidated equity for the applicable financial year (2026, 2028 and/or 2031), multiplied by 1.65 but adjusted for the capital injections Genova has done to Järngrinden, which shall be valued at the cash injection actually made (i.e., multiplied by 1.0).

The ownership of Järngrinden will, from the fourth quarter 2021, be presented in the consolidated balance statement of the group as an associated company, entailing that 562.5 MSEK will be presented in the consolidated balance statement. Based on Järngrinden's financial results 12 months from the last day in June 2021, the Acquisition is expected to have a positive effect on Genova's results of around 35 MSEK on a yearly basis notwithstanding of the effects on the result from the capital injection of 275 MSEK to Järngrinden due to the Acquisition.

Carnegie and Swedbank have been assigned to investigate the possibilities to carry out a directed new share issue

Genova intends to finance the Acquisition partly by a directed share issue of around 2.25 million ordinary shares, and partly by utilising existing funds.

The board of directors in Genova have, based on the authorisation from the annual general meeting held on 7 May 2021, engaged Carnegie and Swedbank to investigate the possibilities to carry out a directed share issue of around 2,25 million ordinary shares through an accelerated book-building process.

The subscription price of the directed new share issue will be decided by the accelerated book building procedure, which will be initiated immediately after the publication of this press release. The new share issue is conditional upon a resolution from the board of directors, which, together with pricing and allocation, is expected to take place before the trading on Nasdaq Stockholm is initiated on 29 September 2021. Genova will publish the results of the directed new share issue when the book building procedure has been carried out, and no later than when trading is initiated on Nasdaq Stockholm on 29 September 2021. The board of directors for Genova can, at any time, end, shorten or extend the book building procedure and refrain from, wholly or partly, carrying out the directed new share issue.

The reasons for deviation from the shareholder's preferential rights by carrying out a directed new share issue is that it is a pre-condition in order to be able to carry out the Acquisition of Järngrinden, that Genova procures necessary capital for part of the-financing of the Acquisition within a short timeframe, which is made possible by the faster and more cost efficient capital raising enabled by a directed new share issue. In addition, the board of directors consider it to be positive that the institutional ownership base is increased, which is also deemed to be positive for the liquidity in the share. The board of directors' overall assessment is thus that the reasons for carrying out the new share issue with deviation from the shareholder's preferential rights overweighs the principal rule that new share issues shall be carried out with preferential rights for existing shareholders and that a new issue with deviation from the shareholder's preferential rights is therefore in the interest of Genova and all its shareholders.

In connection with the directed new share issue, Genova has entered a lock-up agreement with the investment banks which entails that Genova cannot, with a few exceptions, carry out a directed new share issue during a period of 180 calendar days, calculated from 28 September 2021.

For further information, please contact:

CEO, Michael Moschewitz, mobile +46 (0)70-713 69 39, michael.moschewitz@genova.se

About Genova

Genova Property Group AB (publ) is a modern property company with a personal touch that owns, manages and develops properties with focus on Greater Stockholm area and Uppsala Region. On 30 June 2021, the value of the company's property portfolio amounted to approximately SEK 7.1 billion with a lettable area of approximately 243,000 sqm and the company held 6,782 building rights for residential units. Genova's ordinary shares have been listed on Nasdaq Stockholm since June 2020.

This information is such information that Genova Property Group AB (publ) is obligated to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, on 28 September 2021 at 17.40 CEST.

Genova – Smålandsgatan 12 – SE-111 46 Stockholm – www.genova.se

Important information

The release, announcement or distribution of this press release may, in certain jurisdictions, be subject to restrictions and the recipients of this press release in jurisdictions where this press release has been published or distributed shall inform themselves of and follow such legal restrictions. The recipient of this press release is responsible for using this press release, and the information contained herein, in accordance with applicable rules in each jurisdiction. This press release does not constitute an offer, or a solicitation of any offer, to buy or subscribe for any securities in Genova in any jurisdiction, neither from Genova nor from someone else.

This press release does not identify or suggest, or purport to identify or suggest, the risks (direct or indirect) that may be associated with an investment in the Company's shares. Any investment decision to acquire or subscribe for shares in connection with the directed issue must be made on the basis of all publicly available information relating to the Company and the Company's shares. Such information has not been independently verified by Genova. The information in this press release only aims to provide background information and does not claim to be full or complete. No information, regardless of purpose, should be attached to the information in this press release or its accuracy or completeness.

This press release does not constitute a recommendation for any investors' decisions regarding the Directed Issue. Each investor or potential investor should conduct a self-examination, analysis and evaluation of the business and information described in this press release and publicly available information. The price and value of the securities can decrease as well as increase. Achieved results do not provide guidance for future results.

This press release does not constitute or form part of an offer or solicitation to purchase or subscribe for securities in the United States. The securities referred to herein may not be sold in the United States absent registration or an exemption from registration under the US Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold within the United States absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. There is no intention to register any securities referred to herein in the United States or to make a public offering of the securities in the United States. The information in this press release may not be announced, published, copied, reproduced or distributed, directly or indirectly, in whole or in part, within or into the Australia, Canada, Japan, Hong Kong, New Zealand, Singapore, United Kingdom, South Africa, Switzerland, the United States or in any other jurisdiction where such announcement, publication or distribution of the information would not comply with applicable laws and regulations or where such actions are subject to legal restrictions or would require additional registration or other measures than what is required under Swedish law. Actions taken in violation of this instruction may constitute a crime against applicable securities laws and regulations.

This press release is not a prospectus for the purposes of Regulation (EU) 2017/1129 (the "Prospectus Regulation") and has not been approved by any regulatory authority in any jurisdiction. Genova has not approved any offer to the public of shares or other securities in any of the EEA countries and no prospectus has been or will be prepared in connection with the Directed Issue. In all EEA Member States, this notice is addressed and is addressed only to qualified investors in that Member State within the meaning of the Prospectus Regulation.

Forward looking statements

This press release contains forward-looking statements that reflect the Company's intentions, beliefs, or current expectations about and targets for the Company's and the Group's future results of operations, including Genova's current beliefs or expectations about future events and financial and operational achievements, including statements about guidance, planning, prospects and strategies. Words like "intend", "estimate", "expect", "can" and similar expressions about indications or predictions about future development or trends which are not based on historical facts constitutes forward-looking information. Even if Genova believes that these statements are based on reasonable assumptions and expectations, it cannot give any warranties for that any such forward looking statements will be materialised. Since these forward looking statements involve both known and unknowns risks and uncertainties, the actual outcome can be essentially different compared to the forward-looking information. Such risks and uncertainties include but are not limited to the following: that the Acquisition contributes to the achievements of Genova's operational and financial targets. Estimated total investment volume in Järngrinden's property development portfolio as well as estimated value after the completion of the development portfolio. Based on Järngrinden's financial results 12 months from the last day in June 2021, the Acquisition is expected to have a positive influence on Genova's results of around 35 MSEK on a yearly basis, notwithstanding of the effects on the result entailed by the capital injection of 275 MSEK to Järngrinden due to the Acquisition. Forward looking statements in this press release only apply at the time for the press release and may be changed without notice. Genova does not undertake any obligation to publicly update or revise any forward looking statement as a result of new information, future events or anything else, if it is not required by applicate law or rules at the stock exchange.

In the United Kingdom this press release, including any other information regarding the securities as mentioned here, is distributed and directed only, and an investment or investment activity attributable to this document are only available to an will be used by "qualified investors" which (i) have professional investment experience falling within the at any time applicable Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"), or (ii) are high net worth entities or other persons to which it can legally be undertaken with encompassed by Article 49(2)(a) to (d) of the Order (all such persons under (a) and (b) above are jointly referred to as "Relevant Persons"). The Securities are only available to, and every invitation, offer or agreement to subscribe, buy or otherwise acquire such securities will only include Relevant Persons. Those who are not Relevant Persons shall not act on, or rely on, these documents or their content.

Information to distributors

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014 /65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the shares in Genova have been subject to a product approval process, which has determined that such shares are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "EU Target Market Assessment"). Notwithstanding the Target Market Assessment, Distributors should note that: the price of the shares in Genova may decline and investors could lose all or part of their investment; the shares in Genova offer no guaranteed income and no capital protection; and an investment in the shares in Genova is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the new share issue.

For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the shares in Genova.

Each distributor is responsible for undertaking its own target market assessment in respect of the shares in Genova and to resolve on suitable distribution channels.

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