CTY After the Tender: How Much of the New Value Will Actually Turn Into Cash?

Where This Follow-Up Begins

The main article argued that the real question at Norstar is not whether there is value inside G City. There is. The question is how much of that value can actually climb to the parent in time. This follow-up isolates the CTY move because at first glance it looks like a rare shortcut: G City spends about EUR 190 million on the tender, expects about EUR 164 million of special dividends from CTY, and shows an expected uplift of about ILS 640 million to its own equity and about ILS 330 million to Norstar's equity.

The temptation is obvious: call it almost free value. But that is only half the picture. By the end of 2025 G City already held about 59.1% of CTY, and the tender raised that to about 86.4%. The move did not open a new platform. It deepened ownership in a company that already sat inside the group. In a structure like that, equity uplift is recognized faster than it turns into free cash.

That is also the core difference between value and value capture. In 2025 Norstar's share of G City's cash dividend was only about ILS 34 million, and another roughly ILS 38 million came as an in-kind dividend in Orion shares, not as cash. Against those figures, an equity uplift of about ILS 330 million at Norstar looks very large, but it still sits one floor below the parent. So the right question is not whether CTY created value. The right question is how much of the new value can get through the financing, leverage, and dividend layers on the way up.

The Economics of the Tender

The move began with an off-market transaction in November 2025, when G City bought 14,188,052 CTY shares, about 7.7% of the share capital, at EUR 4 per share for total consideration of about EUR 56.75 million. That price reflected a discount of about 44% to CTY's equity as of September 30, 2025, but it also represented premiums of 18.9% and 17.6% to the average CTY closing price over the three months and 12 months preceding October 31, 2025. That matters, because the deal looks very cheap against book equity, but not especially cheap against market trading itself.

Once the holding crossed 50%, Finnish law required G City to launch a tender for the minority. On December 31, 2025 it offered EUR 4 per share. Then, after CTY announced a EUR 0.2 per-share return of capital in January 2026, the tender price was adjusted to EUR 3.80. In March 2026 the results were published: about 50 million shares, or about 27.3% of the share capital, were tendered, taking G City's stake up to about 86.4%.

The number that makes the transaction look so attractive is the cash gap. Gross consideration was about EUR 190 million. But in the same disclosure G City says it expects to receive total special dividends from CTY of about EUR 164 million, which reduces the net economic outlay to only about EUR 26 million.

This is exactly where the reader has to stop. The low net economic cost does not come only from buying cheaply. It also comes from the target itself sending a large part of the cash back through special dividends. That can still be an excellent transaction. But it is not a gift appearing from outside the system. It is internal value recycling within the CTY and G City structure, which means it needs much more execution proof than a headline of EUR 26 million net cost suggests.

The financing setup reinforces the same point. G City says the consideration was funded mainly from its own sources. Before completion it signed a financing agreement with a financial institution for CTY share purchases of EUR 195 million, but as of the report date only about EUR 100 million was drawable. In other words, even with debt support in place, the move still relied first on internal liquidity and flexibility inside the group.

Where the Value Still Stops Short of Cash

On accounting and equity terms, the picture looks very strong. G City estimates that the tendered-share acquisition will increase its equity by about ILS 640 million, or about ILS 3.57 per share. At Norstar itself the expected equity uplift is about ILS 330 million. In addition, G City estimates an FFO increase of about ILS 38 million in 2026.

These are real numbers. But they do not sit at the same layer. The ILS 640 million uplift belongs to G City. The ILS 330 million uplift at Norstar is the same gain translated one level higher. The FFO increase belongs to G City, not to Norstar. And Norstar shareholders see cash only if CTY can send cash upward, if G City chooses and is able to distribute it further, and if the parent does not first need that money for debt reduction or equity preservation.

That gap becomes especially clear when the transaction is compared with the cash stream that has already been proved. In 2025 Norstar's share of G City's cash dividend was about ILS 34 million. That is real money, but it is far smaller than the equity uplift now attributed to CTY. Even after adding the roughly ILS 38 million of Orion shares that Norstar received as an in-kind dividend, this is still a very different distribution channel: securities, not cash that immediately expands parent-level flexibility.

That is why the market is unlikely to give full credit for the accounting uplift alone. For Norstar shareholders, the tender mainly buys a larger share of CTY's future cash flow and future equity, not cash that has already landed at the parent. To close the gap between ILS 330 million on paper and only tens of millions of shekels of actual cash, the market will need to see more than a one-off special dividend.

G City's new dividend policy, approved on March 16, 2026 at ILS 0.16 per share per quarter, moves in the right direction but does not settle the story by itself. It improves the odds of a more regular upstream flow. It does not change the fact that the new CTY value still has to pass through G City's layer before it becomes free at Norstar.

Leverage Is the Part the Headline Hides

Viewed through G City's holding layer, the move looks compelling. Buying minority interests at a deep discount adds equity, improves FFO, and even reduces G City's expanded solo leverage by 2.1%. But in the same sentence the company says consolidated leverage at both Norstar and G City will rise by 2.7%.

This is not a technical footnote. It is the proper way to read the transaction. At the G City holding layer, buying minority interests at a deep discount genuinely increases G City's share of future assets and cash flows. At the consolidated group layer, cash leaves the system, debt and obligations remain inside it, and the test becomes an execution test: can CTY reduce leverage again through asset sales and liability management, or does the deal remain another chapter of accounting value with a still-tight credit picture.

Here the report gives a fairly clear picture of the other side of the story. During 2025 CTY repurchased about EUR 340 million nominal of 2026 and 2027 bonds for about EUR 332 million, while issuing EUR 450 million of new debt due in 2031. In addition, it repurchased about EUR 35 million nominal of hybrid bonds for about EUR 36 million. In March 2026 CTY also announced a full early redemption of its 2026 bond series on April 7, 2026, with about EUR 123 million nominal still outstanding as of the report date.

The same is true in ratings. CTY's credit profile deteriorated through 2025: in March debt was affirmed at BBB- while the issuer rating was cut to BB+, in September debt was lowered to BB+ and the issuer to BB, and in November debt was lowered to BB- and the issuer to B+. After the tender results were published in March 2026, CTY was removed from watch, but the final outcome still does not read cleanly: debt was updated to B+ and the issuer to B. In other words, uncertainty around the tender fell, but the credit profile remained weak.

Put simply, the tender did not solve the leverage question. It replaced one question with another. Instead of asking whether G City could complete the transaction, the market is now asking whether CTY can turn the deal into a cleaner financing story through disposals, redemptions, and a calmer debt structure.

What Has to Happen for the New Value to Become Real Cash

The most important variable now is not another equity line. It is the pace at which CTY executes the non-core asset disposal plan of about EUR 1 billion over 24 months, which it announced in February 2026. Without that, it is very easy to remain with a transaction that looks brilliant in a net-cost-versus-equity-uplift calculation, but much less convincing as an answer to the leverage and cash question.

The second point is how value gets distributed along the chain. Even if CTY generates more cash, Norstar does not benefit directly. The cash first has to move up to G City, and only then become a dividend, debt reduction, or wider room to maneuver at the parent. That is why special dividends around the transaction are not enough on their own. The market needs to see that once the one-off event is stripped out, a more durable upstream channel also exists.

The third point is a real improvement in the credit picture, not just removal from watch. As long as CTY remains post-tender with a debt rating of B+ and an issuer rating of B, it is hard to argue that monetization has already been completed. At most one can say that the transaction created a better starting point. From here the company still has to prove that the equity uplift will be matched by lower financing pressure.

Conclusion

At first glance the CTY tender looks like one of the cleaner transactions Norstar could hope for: a deep discount to equity, only about EUR 26 million of net economic cost, about ILS 330 million of added equity at Norstar, and added FFO at G City. But it is still not a clean cash transaction.

The reason is simple. A large part of the apparent cheapness comes from the fact that CTY itself is expected to send back EUR 164 million in special dividends while continuing to refinance debt, redeem nearer maturities, and lean on a large disposal plan. At the same time, what looks like an improvement at G City's holding layer shows up as a 2.7% increase in consolidated leverage. And at Norstar itself, the path between equity uplift and free cash still runs through G City.

So the right read is neither "free value" nor "strategic mistake". It is a better value-capture transaction than a value-realization transaction. It materially improved G City's and Norstar's share of CTY's future pie. The market now has to see how much of that pie will actually come out in cash.