ROTTERDAM, NETHERLANDS-Locally-based REIT/FBI VastNedOffice/Industrial and Dutch peer Nieuwe Steen Investment have takenup merger discussions to form a company that would hold $3.2billion assets under management in office and retail property. NSIis offering a share deal pitched at around 10% over closingprice.

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After NSI approached the twin VastNed companies, with combinedmarket cap at around $295 million last Friday, the latter agreed toenter conversations in line with fiduciary duty, whileinvestigating all possible alternatives. NSI has offered a mergerthrough a share swap. It already holds a stake in VastNed O/I’ssubsidiary Intervest Offices and currently has a portfolio of $1.7billion assets under management. Both firms emphasized that thesediscussions are still in an exploratory phase, and that there is noguarantee whatsoever that a transaction will occur.

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The deal, at a 9.7% premium to VastNed O/I's closing price onFriday, marks a change in strategy for the firm, reported Reuters.NSI has looked to Switzerland, France and Germany to expand abroadand build a portfolio of office and retail properties since Israeliinvestment group Habas bought a 21% stake in 2007. Petercam analystStephan Van Weeren said NSI was late into France, found thatSwitzerland is too expensive, and has struggled to get a sizeableportfolio in Germany. NSI proposes an exchange ratio of 0.85 NSIshare for every VastNed O/I share, valuing VastNed shares at $17.Including VastNed O/I's direct investment result of 82 cents pershare for the nine months to September, which it usually pays outas a dividend, the final price would be $17.86 per share. NSI has amarket capitalization of around $871 million.

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For the first nine 2010 months, NSI posted a direct investmentresult of $53 million, fractionally up on the same period in 2009.It paid a dividend of 88 cents for the first half and in the secondquarter issued 9.99% of capital in the form of new shares.

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AllanSaunderson is a managing editorof PropertyInvestor Europe and a contributor toGlobeSt.com.

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