Signing a sale contract for Budimex Nieruchomości – communication from the Management Board of Budimex SA

News date: February 22, 2021
Signing a sale contract for Budimex Nieruchomości – communication from the Management Board of Budimex SA

As a result of negotiations started in December 2020, Budimex S.A. decided to conclude a conditional contract to sell all shares in Budimex Nieruchomości Sp. z o.o. The agreed value of the transaction amounts to PLN 1 billion 513 million. The purchaser is CP Developer S.ar.l., a company set up for the purpose of concluding the contract by entities related to the company: Cornerstone Partners sp. z o.o. with its registered office in Warsaw and Crestyl Real Estate s.r.o. with its registered office in Prague. In our opinion, the transaction parameters reached in the course of negotiations are beneficial for both parties.


The decision on the sale of shares was preceded by a several-month process of revision of strategic options started in July 2020. Within the framework of the above process, Budimex S.A. together with an advisor analysed several scenarios for development of the company. In September of last year, a decision was taken to focus the process on the option to acquire a strategic investor, and in November the selected group of investors joined the due diligence of the development sector. In December, we received five offers for the purchase of Budimex Nieruchomości and, after analysing them, we decided to grant exclusivity to a chosen tenderer, and made it possible to carry out a thorough due diligence and negotiate a conditional sales agreement satisfactory for both parties.


The condition for the conclusion of the final contract transferring the right to shares is obtaining by the Purchaser of a consent from the President of UOKiK for the execution of the transaction. For the next few months we will therefore remain the owner of Budimex Nieruchomości and during this period we intend to continue to support the company's management board in the development of the business and prepare for the company's exit from the Budimex Group.


The entities which control the company purchasing shares in Budimex Nieruchomości are entities with business experience acquired in the Polish and foreign residential and commercial real estate markets. Budimex S.A. strongly believes that the new strategic investor will effectively support the further development of the company while maintaining good relations with its employees and clients. We hope that the purchaser's experience will enable the expansion of the company’s business and a successful business diversification.


In the opinion of Budimex SA, the company is a good asset clearly distinguished from the competitors. The company was established in 2005 on the basis of the development activity initiated by the Budimex Group in 1999. Since the beginning of its operations, the company has built more than 17,500 apartments and other premises. Budimex Nieruchomości Sp. z o.o. is currently among the top 5 developer companies in Poland. A land bank of more than 6,500 apartments, and a large number and variety of projects being implemented are a guarantee for revenue growth over the next 2-3 years. The company's financial situation is supported by a stable increase in house prices. Current pre-sales of apartments in the company confirm the good business situation on the real estate market. Long-term prospects for the real estate market are promising. This is confirmed by the number of apartments in Poland per 1,000 inhabitants, which is far above the EU average. Despite many positive trends on the Polish real estate market, Budimex S.A. draws attention to the forthcoming changes on the Polish real estate market. The evolution of customer expectations and the expansion of foreign companies specializing in institutional rental may change the business model in the development investment sector. Budimex S.A. believes that the new owner will be able to adapt more effectively to potential transformations in the residential market.


As Budimex S.A. we intend to continue the construction activity consisting in the realization of residential buildings in the form of general execution. The value of the portfolio at the end of 2020, including the residential contracts, amounted to PLN 764 million (of which the value of the contracts performed in respect of Budimex Nieruchomości amounted to PLN 580 million). Our trade office is currently conducting negotiations with Budimex Nieruchomości concerning the implementation of subsequent projects. We believe that after the transaction our cooperation with Budimex Nieruchomości will continue to be beneficial for both entities.


The implementation of the transaction of sale of Budimex Nieruchomości will have a positive impact on the financial results of Budimex SA. Provided that the dispositive contract has been concluded and upon its conclusion, Budimex S.A. will recognise in its unit financial statements for profit before tax in the amount of approx. PLN 755 million, while it will present in the consolidated financial statements profit before tax in the amount of PLN 690 million. These values are estimates and may be subject to change after the final settlement of the effect of the transaction in the accounts and the final settlement of the costs associated with the transaction.


Funds from the sale of the development sector may support further business diversification of the Budimex Group, but the decision about their final allocation belongs to the shareholders. The Management Board of Budimex S.A. sees several investment opportunities in the area of the services sector. The annual sales in this sector exceed PLN 600 million and the current operating profitability is 11-12%. Further plans provide for the acquisition of at least one smaller company from the waste management sector per year. In the longer term, Budimex S.A. also plans geographical diversification within the construction sector. The Group's interests are the German, Czech and Slovak markets. In addition, the possibility of involvement in the construction of wind or photovoltaic farms, as a contractor, but also as an investor, is being analysed.


The advisers of Budimex during the transaction were: Santander Bank Polska S.A. together with Banco Santander S.A. as a financial adviser and the Clifford Chance Janicka, Krużewski, Namiotkiewicz i wspólnicy s.k. law firm as a legal adviser.