Signing of the sale agreement for Budimex Nieruchomości – announcement of the Management Board of Budimex SA

As a result of negotiations started in December 2020, Budimex S.A. decided to conclude a conditional agreement for the sale of all shares in Budimex Nieruchomości Sp. z o.o. The agreed value of the transaction will amount to PLN 1 billion 513 million. The buyer is CP Developer S.àr.l. – a company established for the purpose of concluding an agreement 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 parameters of the transaction achieved in the course of the negotiations are beneficial for both parties.  

The decision to sell the shares was preceded by a several-month-long process of reviewing strategic options that began in July 2020. As part of the aforementioned process, Budimex S.A., together with the advisor, analysed several scenarios for the Company’s development. In September last year, a decision was made to focus the process on the option of acquiring a strategic investor, and in November a selected group of investors began due diligence of the development segment. In December, we received five offers to acquire Budimex Nieruchomości and, after analysing them, we decided to grant exclusivity to the selected bidder, enabled an in-depth due diligence and negotiated a conditional sale agreement satisfactory to both parties.

The condition for concluding the final agreement transferring the right to the shares is that the Buyer obtains the consent of the President of the Office of Competition and Consumer Protection to the transaction. Therefore, in the next few months we will remain the owner of Budimex Nieruchomości and we intend to continue to support the Company’s Management Board in business development and prepare for the Company’s exit from the Budimex Group during this period.

The entities that control the company acquiring shares in Budimex Nieruchomości are entities with business experience gained on the Polish and foreign residential and commercial real estate markets. Budimex S.A. deeply believes that the new strategic investor will effectively support the further development of the Company, while taking care of good relations with its employees and customers. We hope that the buyer’s experience will enable us to increase the scale of the Company’s operations and successfully diversify our business.

In the opinion of Budimex S.A., the Company is a good asset, definitely standing out from its competitors. The company was established in 2005 on the basis of development activities initiated by the Budimex Group in 1999. Since the beginning of its activity, the Company has built over 17,500 apartments and premises. Budimex Nieruchomości Sp. z o.o. is currently among the 5 largest development companies in Poland. A land bank of over 6,500 apartments and a large number and variety of projects are a guarantee of revenue growth over the next 2-3 years. The Company’s financial situation is supported by a stable increase in housing prices. The current results of pre-sales of apartments in the Company confirm the good economic situation on the residential real estate market. The long-term prospects for the development of the housing market are promising. This is confirmed by the number of dwellings in Poland per 1,000 inhabitants, which is significantly different from the EU average. Despite many positive trends on the Polish residential market, Budimex S.A. draws attention to the upcoming changes on the Polish residential real estate market. The evolution of customer expectations and the expansion of foreign entities specializing in institutional rental may change the model of doing business in the development investment sector. Budimex S.A. believes that the new owner will be able to adapt more effectively to the possible transformation of the housing market.

As Budimex S.A., we intend to continue our construction activities consisting in the construction of residential buildings in the general contracting formula. Portfolio value at the end of 2020 covering housing contracts amounted to PLN 764 million (of which the value of contracts executed for Budimex Nieruchomości amounted to PLN 580 million). Our sales office is currently negotiating with Budimex Nieruchomości regarding the implementation of further projects. We hope that after the transaction, our cooperation with Budimex Nieruchomości will continue to be beneficial to both entities.

The execution of the sale transaction of Budimex Nieruchomości will have a positive impact on the financial results of Budimex SA. At the time and subject of the conclusion of the disposition agreement, Budimex SA will recognise in the separate financial statements a profit before tax of approximately PLN 755 million, while in the consolidated financial statements it will show a profit before tax of approximately PLN 690 million. The above values are estimates and may change after the final settlement of the effect of the transaction in the accounting books and the final settlement of the costs related to the transaction.

The funds from the sale of the development segment may support further business diversification of the Budimex Group, but the decision on their final allocation is up to the shareholders. The Management Board of Budimex S.A. sees several investment opportunities in the services segment. Annual sales in this segment  exceeded PLN 600 million, and the current operating profitability is 11-12%. There are plans to acquire at least one smaller company from the waste management industry per year. In the long term, Budimex S.A. also plans to diversify geographically within the construction segment. The Group’s interests include the German, Czech and Slovak markets. In addition, the possibility of getting involved  in the construction of wind or photovoltaic farms is being analysed – as a contractor, but also as an investor.

Budimex was advised on the transaction by: Santander Bank Polska S.A. together with Banco Santander S.A. as financial advisor and Clifford Chance Janicka, Krużewski, Namiotkiewicz i wspólnicy s.k. as legal advisor.