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Tue 4 Mar 2008 12:18 PM

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Dubai bid for Colonial collapses

Investment Corporation of Dubai fails to reach agreement with shareholders for Spanish property firm.

Dubai bid for Colonial collapses
PRIME PROPERTIES: Colonial has real estate holdings in several cities across Spain, including Madrid, pictured. (Getty Images)

Sovereign wealth fund Investment Corporation of Dubai (ICD) pulled out of a 3 billion euro ($4.6 billion) plus cash-and-bond offer to buy Spanish property firm Colonial on Tuesday.

ICD said in a statement that it and shareholders had not been able to reach agreement by the Monday deadline.

"As a consequence... the offer formulated by ICD has expired," the Dubai fund said in a statement to the Spanish stock market.

Shares in the indebted firm were indicated down 6.5% at 1.15 euros as the market opened on Tuesday.

Colonial's two main shareholders, former chairman Luis Portillo and Luis Nozaleda, chairman of the Nozar group, who together own 52%, had held lengthy talks with ICD over the price and terms of the deal after initially agreeing to sell.

ICD was pushing for a discount, or improved conditions, on Colonial's 4.66 billion euro syndicated loan.

The offer depended on reaching a deal with Colonial's creditors - Goldman Sachs, Royal Bank of Scotland (RBS), Eurohypo AG and Calyon.

Now that the bid has fallen through, Colonial's banks could face writedowns. Otherwise they might have to take on some of its assets themselves, seeing as the company has already breached covenants, or renegotiate the loans - an option bankers saw as highly unlikely given the credit crunch and sector outlook.

The market doubted the deal would succeed and Colonial shares reflected that, falling 28% since the offer was made.

Colonial has been viewed as a takeover target since its share price slumped in December as shareholders unwound derivative positions on its stock, which was already falling on worries about a sudden slowdown in the Spanish property sector.

ICD is the only group to have put forward a bid - offering either 1.85 euros cash per share now or debt that will be worth 2.25 euros a share when it matures in four and half years' time. (Reuters)

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