€1bn worth of Irish property assets in Kennedy Wilson discounted takeover deal
Kennedy Wilson Europe, which owns a €1bn chunk of mostly commercial property in Ireland such as the Portmarnock Hotel and Golf Links, is to merge with its US sister company, Kennedy Wilson Inc to create a $4bn (€3.7bn) global property-investment giant.
The US arm has valued its European partner at £1.5bn (€1.7bn), representing a 20pc premium to Kennedy Wilson Europe's share price last week.
The combined group will have about 400 properties around the world.
Of Kennedy Wilson Europe's £2.88bn in portfolio assets, 31pc are held in Ireland, with most of those in Dublin, including the Stillorgan Shopping Centre, with the majority of the remainder in the UK. It also has some assets in Spain and Italy.
Kennedy Wilson Europe Real Estate, whose shares are listed in London, has recommended the merger to its shareholders. It said the deal represents a discount of about 3.4pc to the firm's last reported adjusted net asset value of £12.16 per share at the end of December.
Analysts at Merrion Capital had last month predicted that Kennedy Wilson Europe would receive a takeover approach within 12 months, noting at the time that the market value of Kennedy Wilson Europe was 20pc to the value of the assets on its books.
The US unit had recently been buying shares in Kennedy Wilson Europe, of which it is the investment manager.
Kennedy Wilson began investing in Ireland's battered property market in 2008 and floated the European unit on the stock exchange in 2014.
It has bought a number of high-profile assets here and made significant financial returns without having to pay any tax in Ireland.
Kennedy Wilson Europe Real Estate, which is tax resident in Jersey, pays 25pc tax on taxable profits generated in its Spanish subsidiaries, and it pays income tax at 20pc on rental income derived from its UK investment properties. But the qualifying investor alternative investment funds (QIAIFs) it uses in Ireland to hold its assets were until this year entirely exempt from any Irish taxation on income and gains.
The group's total tax bill last year was £7.3m (€8.6m) on profits of £73.3m.
But the new Finance Bill has imposed a 20pc withholding tax on distributions from Irish property funds to overseas investors. And an amendment to the bill subsequently abolished many planned exemptions for investors.
Kennedy Wilson Europe pointed out in its recently-published annual report that in 2014 it acquired a €202.3m Irish loan book for €75.5m.
Assets backing the loans included 17 properties such as the 'Irish Times' building in Dublin. The firm said it generated a 31pc return on the cost of the 'Irish Times' building when it sold it in 2016.