Citycon Oyj - Company Announcement

Citycon acquires Sektor Gruppen, a Norwegian shopping centre owner and manager, for approximately EUR 1.5 billion and intends to raise EUR 600 million through a rights issue

CITYCON OYJ Stock Exchange Release 25 May 2015 at 3.35 p.m.

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Citycon acquires Sektor Gruppen, Norway's second largest shopping centre owner
and manager - consolidating Citycon as the largest listed shopping centre
specialist in the Nordics by gross asset value (GAV) and the third largest
listed continental European operator. With the EUR 1.47 billion acquisition,
Citycon gains exposure throughout the entire Nordic region, while increasing
its GAV by nearly 50%, from EUR 3.4 billion to EUR 4.9 billion. 

Citycon Oyj (Citycon) has today agreed to acquire all the shares in the
Norwegian shopping centre company Sektor Gruppen AS (Sektor) from its owners
Joh Handel Eiendom 1 AS, Varner Invest AS and K&S Holding AS. The agreed
debt-free acquisition price is approximately EUR 1,467 million (NOK 12,320
million), (based on the exchange rate 8.4), subject to customary balance sheet
and post-closing adjustments. 

Citycon intends to finance the acquisition through a rights issue of
approximately EUR 600 million (the "Rights Issue"), a EUR 250 million bridge
financing facility obtained from a syndicate of Nordic banks and from available
financing facilities if necessary. In addition, waivers have been obtained for
approximately EUR 671 million of the existing bank financing facilities of
Sektor to remain in place post-closing. The closing of the transaction is
expected to take place in July 2015. 

Transaction highlights

  -- Strengthened Nordic position through enlarged footprint and geographical
     diversification. Following the transaction, Citycon will own 55 shopping
     centres in the Nordic countries and Estonia and increase its total annual
     footfall from approximately 150 million to over 200 million
  -- Excellent strategic fit - portfolio of quality urban grocery-anchored
     shopping centres in locations with strong demographics
  -- Immediate critical mass in Norway - one of the fastest growing and
     wealthiest economies in Europe
  -- Established Norwegian management platform joining Citycon: ability to focus
     on value creation from day one
  -- Net initial property yield of approximately 5.2% with material organic
     growth potential. Expected to be accretive to earnings per share as of 2016
  -- Upside potential through operational and financial synergies
  -- Strong financial profile with target Loan to Value (LTV) level of 40-45%
     maintained
  -- Material increase in number of shares  together with larger asset base 
     improves  market visibility and financing options
  -- Citycon's two largest shareholders, Gazit-Globe and Canada Pension Plan
     Investment Board, are supportive of the transaction and have, subject to
     certain customary conditions, committed to pro-rata undertakings in the
     Rights Issue

“We're very excited about this acquisition, which completes our Nordic
presence. The transaction is a defining step forward in our goal to be the
household name for Nordic and Baltic shopping centres. During recent years, we
have been focusing on strengthening our balance sheet, improving our cost base
and operations and now we are ready for a strategic step by enlarging our
operating platform. Sektor represents a perfect strategic fit for us, being
recognized as a quality organization with an impressive track record, good
assets and experienced management,” says Marcel Kokkeel, CEO of Citycon. 

“We are happy to receive an owner with strong retail real estate experience and
a long-term vision and investment horizon. Integrating Citycon's wide
experience, financial strength and strong management with ours will provide the
optimum conditions for further growth and development, while creating scale
advantages and synergies,” says Eirik Thrygg, CEO of Sektor. 

The transaction reflects Citycon's clear focus on expanding its asset portfolio
in urban, fast-growing Nordic cities. Sektor's portfolio fulfils Citycon's
asset selection criteria with regard to urban locations, everyday shopping,
strong demographics and proximity to public transportation and services to
ensure consistent footfall. Following the completion of the acquisition,
Citycon will have leading market positions in Finland, Sweden, Norway and
Estonia as well as an established foothold in Denmark. 

Based on the increased size and geographical footprint, Citycon believes
material operational and financial synergies can be secured within the next
three years. Citycon sees income upside through best practice sharing,
speciality leasing, digital marketing initiatives and cross-country tenanting
leveraging on its existing relationships with Nordic and international
retailers. Citycon also believes that the broader integrated platform will
bring operating efficiencies. Citycon's ambition is to generate annual
like-for-like net rental income growth of +100bps above CPI (Consumer Price
Index) for the Sektor portfolio going forward. Also, Citycon sees potential to
increase the net initial property yield by +20 bps by year-end 2015 due to
developments coming online. Additionally, Citycon expects savings in
administrative expenses and lower funding costs driven by the enhanced access
to capital and improved risk profile implied by higher diversification and
larger asset base. 

The integration of Sektor will follow a detailed plan to capture synergies and
to combine systems, processes and competences including integration of
financial reporting. The non-recurring transaction costs from the acquisition
are estimated to amount to approximately 1% of the acquisition price
corresponding to approximately EUR 17 million. 

Based on discussions with rating agencies, Citycon expects its current ratings
(BBB by Standard & Poor's and Baa2 by Moody's) to be affirmed with stable
outlook, subject to currently planned Rights Issue and other conditions
relating to the transaction. 

Citycon's guidance for 2015, published in relation to the Q1/2015 results, does
not take into account the effects of this transaction. Citycon will provide an
updated guidance, when the impact of the acquisition can be determined with
full precision. 

For preliminary combined key figures of Citycon and Sektor for 2014, please see
Annex I. 

Financing of the transaction

The estimated total debt-free purchase price payable by Citycon for all the
shares in Sektor will be EUR 1,467 million (NOK 12,320 million), (based on the
exchange rate 8.4). The cash purchase price of EUR 541 million (NOK 4,541
million) will be paid at the closing of the transaction, but remains subject to
customary post-closing adjustment mechanisms. 

Citycon intends to finance the acquisition through a Rights Issue of
approximately EUR 600 million, a EUR 250 million bridge financing facility,
with a maturity of one year, obtained from SEB and Nordea, and from available
financing facilities if necessary. In addition, waivers have been obtained for
approximately EUR 671 million of the existing bank financing facilities of
Sektor to remain in place post-closing. The closing of the transaction is
expected to take place in July 2015. 

In connection with the completion of the transaction, Citycon intends to
refinance three secured bonds issued by Sektor amounting to approximately EUR
222 million (NOK 1,865 million) in total through an early redemption by Sektor
of its outstanding bonds. In addition, an old vendor loan in Sektor of
approximately EUR 42 million (NOK 350 million) will be settled. 

After closing, Citycon will consider available alternatives to optimise its
long term financial structure and refinance the bridge financing facility and
existing Sektor debt within the next year, including but not limited to
issuance of bonds and divestments of non-core assets. Citycon's identified
non-core portfolio amounts to approximately EUR 300 million, which management
expects to divest during the next years. 

The Rights Issue is subject to the extraordinary general meeting of Citycon
authorizing the Board of Directors to decide on the issuance of new shares. A
notice to the extraordinary general meeting to decide on the authorization for
the Board of Directors will be published later today. 

Citycon's two largest shareholders, Gazit-Globe Ltd. (42.8%) and CPP Investment
Board Europe S.à r.l. (15.0%), a wholly owned subsidiary of Canada Pension Plan
Investment Board, have, subject to certain customary conditions, provided
undertakings to subscribe to their pro-rata portion of the Rights Issue. 

Terms and timetable of the transaction

The closing of the transaction is not subject to any third party approvals. The
closing of the transaction is expected to take place in July 2015, after the
completion of the Rights Issue. 

The necessary shareholder authorization for the Rights Issue will be sought at
Citycon's extraordinary general meeting to be convened later today to be held
on 15 June 2015. 

The Board of Directors of Citycon is expected to decide on the timetable and
terms and conditions of the Rights Issue based on the authorization by the
general meeting. The Rights Issue is expected to be launched in June 2015. 

Overview of Sektor

Sektor is the second largest owner, manager and developer of shopping centres
in Norway. Sektor's portfolio comprises a total of 34 shopping centres of which
20 are fully or majority-owned, 4 are minority-owned, 2 rented and 8 managed
shopping centres. Most of the centres (approx. 95%) are located in Norway's
three main economic hubs: the Oslo, Bergen and Stavanger regions. Sektor
generated a total IFRS-based turnover of EUR 127.0 million and operating profit
(including fair value changes on investment property) of EUR 103.5 million in
2014. Based on the Norwegian GAAP figures, the turnover increased by
approximately 11% compared to the previous year and EBIT decreased by
approximately 5% mainly as a consequence of ongoing (re)development projects. 

The fully and majority-owned shopping centres have a gross leasable area of
400,000 sq.m., while the total portfolio under management has a gross leasable
area of more than 600,000 sq.m. The economic occupancy rate for the owned
portfolio was 96.5% at year-end 2014. Sektor's gross asset value is EUR 1.5
billion and the total annual footfall 62 million. 

Sektor focuses on shopping centres with a leading position in their catchment
area, and actively considers potential extensions to ensure viability and
competitiveness. Major tenants include specialty and grocery chains as well as
restaurants, tenants from the banking and financial sectors, and municipal
services. Sektor's largest tenants include Norway's biggest grocery chain
NorgesGruppen and clothing company Varner Gruppen, whose brands include e.g.
Dressmann, Bik Bok and Cubus. Sektor has approximately 150 employees. 

Advisors

Pangea Property Partners acted as Nordic lead transaction advisor to Citycon in
connection with the execution of the transaction. SEB served as financial
advisor, JPMorgan as financial co-advisor and BA-HR as legal advisor to Citycon
in connection with the transaction. 

Roschier, Attorneys Ltd. acts as Citycon's Finnish legal advisor and Shearman &
Sterling (London) LLP as Citycon's US legal advisor in relation to the
contemplated Rights Issue. 

Investor webcast

Citycon CEO, Marcel Kokkeel, and CFO, Exec. VP Eero Sihvonen, will host a live
audiocasting and conference call for investors and analysts on May 26, 2015 at
09:00 CET to discuss the transaction. 

To join the investor audiocasting and slide show:
http://presenter.qbrick.com/?pguid=7b7bc3fa-3693-4636-b6a4-820909516f78

To join the investor audiocasting by phone:
International: +44 20 3003 2666
Norway: +47 2 156 3318
Password: Citycon



Press conference

A press conference will be held in Oslo with the Chairmen and CEOs of both
companies on May 26, 2015 at 10:30 CET at the Thief Hotel, Landgangen 1, 0252
Oslo. 

To join the press conference webcast:
Norwegian:
http://publisher.qbrick.com/Embed.aspx?mcid=958DF5A89936E37E
English (live translation):
http://publisher.qbrick.com/Embed.aspx?mcid=06CB30429936E37E


Helsinki, 25 May 2015

CITYCON OYJ
Board of Directors


Media enquiries:
Geelmuyden Kiese (advisor to Citycon)
Tel. +47 482 00 570
Helge.lunde@gknordic.com

Investor enquiries:
Henrica Ginström
Tel. +358 50 554 4296
Henrica.ginstrom@citycon.com


About Citycon

Citycon is a leading owner, manager and developer of urban grocery-anchored
shopping centres in the Nordic and Baltic region, managing assets that total
approximately EUR 3.4 billion and with market capitalisation of EUR 1.8
billion. Citycon is the No. 1 shopping centre owner in Finland and Estonia and
among the market leaders in Sweden. Citycon has also established a foothold in
Denmark. www.citycon.com 


About Sektor

Sektor Gruppen AS is the second largest company in managing, developing and
marketing of shopping centres in Norway. Sektor's portfolio consists of 20
fully and majority-owned shopping centres, 4 minority-owned centres, 2 rented
shopping centres and 8 managed shopping centres. With these 34 shopping
centres, Sektor creates excellent shopping experiences for its customers in
partnership with tenants. Sektor's total portfolio under management has a gross
leasable area of more than 600,000 sq.m. www.sektor.no 


Annex I: Preliminary combined key figures

Citycon audited consolidated financial statements are prepared according to
IFRS as adopted by the EU (“IFRS”).  The audited consolidated financial
statements of Sektor are prepared according to Norwegian Generally Accepted
Accounting Principles to ("NGAAP"). All NGAAP to IFRS differences as of 31
December 2014 and for the year then ended evaluated by Citycon management as
relevant and significant for the purposes of the presentation of the combined
financial information have been adjusted in the preliminary combined
information presented in this stock exchange release. 

The unaudited preliminary combined financial information does not represent the
actual combination of the financial statements of Citycon and Sektor in
accordance with IFRS, since certain simplifications and assumptions have been
made. Furthermore, the unaudited preliminary combined financial information is
based on certain assumptions that would not necessarily have been applicable if
Citycon had ownership of these assets from the beginning of the period
presented in the unaudited preliminary combined financial information. 

The unaudited preliminary combined information describes a hypothetical
situation. The unaudited preliminary combined financial information has been
prepared for illustrative purposes only to show how the transaction might have
affected Citycon group's consolidated income statement for the period presented
if the acquisition had occurred at an earlier point in time, and consolidated
balance sheet as of 31 December 2014, as if the acquisition had occurred at the
balance sheet date. Because of its nature, the unaudited preliminary combined
financial information addresses a hypothetical situation and, therefore, does
not represent Citycon group's actual financial position or results if the
transaction had in fact occurred on those dates, and is not representative of
the results of operations for any future periods. The unaudited preliminary
combined financial information therefore does not reflect Sektor's or Citycon
group's actual financial position and results. Further, the unaudited combined
financial information is preliminary in nature and must not be considered final
or complete, and may be amended in future publications of accounts. 

Preliminary combined key figures for 2014



                                    Citycon     Sektor  Adjust-men      Combined
                                       2014       2014          ts       figures
--------------------------------------------------------------------------------
Turnover                   MEUR       245.3      127.0           -         372.3
--------------------------------------------------------------------------------
Net rental income          MEUR       169.4       74.0        -1.3         242.0
--------------------------------------------------------------------------------
Operating profit 1)        MEUR       165.0      103.5        -8.9         259.5
--------------------------------------------------------------------------------
Net financial income and   MEUR       -77.5      -49.0           -        -126.5
 expenses                                                                       
--------------------------------------------------------------------------------
Profit for the period 1)   MEUR        89.7       40.2        -8.6         121.3
--------------------------------------------------------------------------------
Fair value of investment   MEUR     2,769.1    1,308.3       104.5       4,181.9
 properties                                                                     
--------------------------------------------------------------------------------
Loan to Value (LTV)        %           38.6       62.4                Approx. 45
--------------------------------------------------------------------------------

1) Including fair value changes on investment property



DISCLAIMER

This announcement is not an offer for sale of securities in the United States.
Securities may not be offered or sold in the United States absent registration
or an exemption from registration under the U.S. Securities Act of 1933, as
amended. Citycon does not intend to register any portion of the Rights Issue in
the United States or to conduct a public offering of securities in the United
States. 

The Company has not authorized any offer to the public of securities in any
Member State of the European Economic Area other than Finland. With respect to
each Member State of the European Economic Area other than Finland and which
has implemented the Prospectus Directive (each, a “Relevant Member State”), no
action has been undertaken or will be undertaken to make an offer to the public
of securities requiring publication of a prospectus in any Relevant Member
State. As a result, the securities may only be offered in Relevant Member
States (a) to any legal entity which is a qualified investor as defined in the
Prospectus Directive; or (b) in any other circumstances falling within Article
3(2) of the Prospectus Directive. For the purposes of this paragraph, the
expression an “offer of securities to the public” means the communication in
any form and by any means of sufficient information on the terms of the offer
and the securities to be offered so as to enable an investor to decide to
exercise, purchase or subscribe the securities, as the same may be varied in
that Member State by any measure implementing the Prospectus Directive in that
Member State and the expression “Prospectus Directive” means Directive
2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive,
to the extent implemented in the Relevant Member State), and includes any
relevant implementing measure in the Relevant Member State and the expression
“2010 PD Amending Directive” means Directive 2010/73/EU. 

No public offer or invitation to acquire securities of Citycon is being made by
or in connection with this release.  Any such offer will be made solely by
means of a prospectus once it has been approved by the Finnish Financial
Supervisory Authority and published in accordance with the law, and any
supplement thereto. This document is being distributed to and is only directed
at (i) persons who are outside the United Kingdom or (ii) to investment
professionals falling within Article 19(5) of the Financial Services and
Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (iii) high
net worth companies, and other persons to whom it may lawfully be communicated,
falling within Article 49(2)(a) to (d) of the Order (all such persons in (i),
(ii) and (iii) above together being referred to as “relevant persons”).  Any
invitation, offer or agreement to subscribe, purchase or otherwise acquire
securities will be engaged in only with relevant persons.  Any person who is
not a relevant person should not act or rely on this document or any of its
contents. 

This announcement is not for publication, distribution or release, directly or
indirectly, in or into the United States, Canada, South Africa, Australia, Hong
Kong or Japan or to any other jurisdiction where such announcement or
publication would be unlawful. The distribution of this announcement may be
restricted by law in certain jurisdictions and persons into whose possession
any document or other information referred to herein comes should inform
themselves about and observe any such restriction. Any failure to comply with
these restrictions may constitute a violation of the securities laws of any
such jurisdiction. 

The information contained in this announcement is for background purposes only
and does not purport to be full or complete. No reliance may or should be
placed by any person for any purposes whatsoever on the information contained
in this announcement or on its completeness, accuracy or fairness. The
information in this announcement is subject to change. Any subscription for
shares in the proposed Rights Issue should be made solely on the basis of the
information contained in the prospectus to be issued by Citycon in due course. 

This announcement contains certain forward-looking statements. These
forward-looking statements involve risks and uncertainties that could
significantly affect expected results and are based on certain key assumptions.
Many factors could cause actual results to differ materially from those
projected or implied in any forward-looking statements. Due to these
uncertainties and risks, readers are cautioned not to place undue reliance on
such forward-looking statements, which speak only as of the date of this
announcement. Citycon disclaims any obligation to update any forward-looking
statements contained in this announcement, except as required pursuant to
applicable law.