Statement of the Board of Directors of Citycon Oyj regarding the mandatory public cash tender offer by G City Ltd

G City Ltd has launched a mandatory public cash tender offer for all Citycon Oyj shares and options it does not already control, offering EUR 3.80 per share (adjusted from EUR 4.00 after Citycon’s EUR 0.20 per-share one-time equity repayment) and EUR 0.18 per option for each of the three 2025 option series. G City and related parties already hold ~108.6m shares (≈59.15%) of the 183,569,011 outstanding shares; the offer period runs from 2 Jan to 6 Mar 2026, and Deutsche Bank provided a fairness opinion (15 Jan 2026) deeming the consideration fair. The Board of Citycon unanimously recommends acceptance, noting financing is via cash plus committed bank debt and that Swedish FDI clearance is identified as the primary regulatory approval risk; accepting shareholders should weigh loss of liquidity and potential loss of independent control (including possible compulsory redemption if >90% is reached).

Analysis

Market structure: G City increasing to ~59% then launching a mandatory EUR 3.80 tender consolidates control and will compress free float (183.57m shares outstanding; market cap at offer ≈EUR 697m). Winners: G City (control, optional delisting upside), cash-tendering minority shareholders (lock 3.80); losers: public liquidity providers, arbitrageurs if spreads widen. Pricing power shifts toward a less-liquid stock; comparable Nordic retail REIT peers may see re-rating pressure (bid/ask widening, implied volatility +20–40% near event). Cross-asset: expect Citycon bond spreads to gap wider on change-of-control covenant risk (±50–150bp) and modest EUR/ILS FX sensitivity given Offeror financing origin.

Risk assessment: Key tail risks—Swedish FDI denial (low probability, high impact), Offeror debt drawdown failure, or covenant-triggered renegotiations leading to credit acceleration. Near-term (days–weeks): share price volatility around announcements and possible pre/post-offer block trades; short-term (weeks–months): regulatory clearance and funding confirmations; long-term (quarters+): potential delisting, reduced liquidity, or strategic asset disposals. Hidden dependencies include change-of-control clauses in bank facilities and potential compulsory redemption if G City >90% (fair-value squeeze). Catalysts: Swedish clearance, additional market purchases by G City, secondary buybacks, or competing bids.

Trade implications: Direct arbitrage—buy-to-tender if shares trade ≤EUR 3.60 (target capture ≥5.6% to 3.80 before fees) with close by 6 Mar 2026; if unwilling to tender, avoid holding into potential compulsory redemption or illiquidity. Relative trades: underweight/NAV-compression long logistics/residential REITs (e.g., PLD/SGRO) vs short Nordic retail REITs; credit players should monitor and/or buy protection if Citycon bond spreads widen >75bp. Options: use 6–12 week put spreads to hedge deal-failure risk or to synthetically replicate tender exposure with capped downside.

Contrarian angles: Consensus treats 3.80 as terminal value; that's incomplete—G City has track record of active asset management and could unlock NAV above 3.80 via selective disposals or capex within 12–36 months. The market may be under-pricing compulsory redemption fairness (could be >3.80) and over-pricing regulatory risk. Historical Gazit transactions show value accretion post-acquisition in some cases, so short-term arbitrage may be safe but long-term downside protection remains prudent. Unintended consequence: lower free float could make the stock permanently mispriced versus EPRA NTA, creating a multi-quarter alpha opportunity for liquidity-tolerant players.

Key Decisions for Investors

• Establish a tender-arbitrage long in Citycon (buy up to 2–3% of fund AUM exposure) only if share price ≤ EUR 3.60 and tender before offer deadline (6 Mar 2026); target locked gross upside ≥ 5.6% to EUR 3.80 with expected hold 4–10 weeks, stop-loss at EUR 3.40.
• If unable/unwilling to tender, open a small short (0.5% AUM) in Citycon if the stock trades >EUR 3.95 post-offer due to illiquidity-driven pop; cover if price >EUR 4.10 or after 3 months to avoid unexpected compulsory redemption mechanics.
• Rotate 1–2% AUM from Nordic retail REITs into logistics/residential REITs (e.g., long PLD or SGRO, short Citycon or equivalent Nordic retail names) with 6–12 month horizon to capture sector rerating; rebalance if Citycon spread to EPRA NTA narrows by >200bp.
• Buy a 3-month put spread as tail protection on Citycon sized to 0.5% AUM (long EUR 3.40 put / short EUR 2.40 put) to cap premium while protecting against regulatory/deal-failure scenarios; monitor Swedish FDI clearance and bond spread widening >75bp as triggers to widen hedge.