G City Cancels New Subsidiary IPO Amid Market Volatility
Translated & summarized from Calcalist by baba
G City has canceled the IPO of its subsidiary Noga Commercial Properties due to a 35% drop in its own stock price, which would have increased leverage. The plan involved transferring Finnish shopping centers to Noga, which would then be distributed to shareholders. Market skepticism and concerns about asset valuation and currency risks also contributed to the decision. G City may now explore issuing new bonds instead.
The story in 6 lines · by baba
- G City canceled its subsidiary Noga's IPO due to a 35% stock price drop.
- The deal would have transferred Finnish shopping centers and increased G City's leverage.
- Market reaction was skeptical, similar to a prior subsidiary IPO, Orion.
- Shareholder concerns included asset location and currency exchange risks.
- G City may now consider issuing new bonds as an alternative.
- Chaim Katzman controls G City through Norstar.
Real estate company G City has called off the planned initial public offering of its new subsidiary, Noga Commercial Properties. The move comes after a significant drop in G City's stock price, which made the transaction financially unviable and potentially counterproductive to the company's goal of reducing leverage.
G City had intended to transfer three shopping centers in Finland, valued at 423 million euros, along with their associated debt, to Noga. Noga would then have been listed on the stock exchange, with its shares distributed as a dividend in-kind to G City's shareholders. However, G City's stock has fallen 35% in the last four months, partly due to uncertainty following Brazil's presidential elections and questions surrounding the company's asset divestment plans after Tzachi Abu took control.
The stock decline meant the planned dividend distribution would have been worth approximately 80 million euros. G City calculated that this would reduce its equity by about 290 million shekels and increase its leverage, directly opposing the initiative's objective. Market reaction to the proposed deal was also reportedly skeptical, mirroring the lukewarm reception of a similar subsidiary IPO, Orion Commercial Properties, launched in December, whose stock has since dropped 56%.
Further complicating matters were shareholder concerns about receiving assets located far from their base, with limited ability to assess their value or management. This was compounded by the high leverage of G City and its reliance on euro-denominated assets while its debt is largely in shekels, creating currency exchange risks. A dispute between a group of shareholders, joined by More Investments, and the company's management also raised questions about the subsidiary's future operations.
G City, controlled by Chaim Katzman through Norstar, has been actively working to reduce its debt since late 2022, with plans to divest assets worth over 7 billion shekels. The company may now consider issuing new bonds as an alternative to the canceled IPO.
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