ANALYSIS: Takeover bid for GSW comes at a challenging time

Listed German residential landlord Deutsche Wohnen may have its work cut out trying to persuade GSW Immobilien's investors to accept a non-cash offer, analysts say.

On Frankfurt's Xetra exchange on Monday, Deutsche Wohnen shares were trading at €13.27, down 0.97%. GSW Immobilien shares were also down 0.63% at €32.92.

The takeover bid comes at a challenging time for GSW, which is still struggling to come to terms with a shareholder rebellion last month which forced out both its chairman and chief executive. GSW announced last Friday that it has appointed its remaining executive board members Jörg Schwagenscheidt and Andreas Segal as co-CEOs.

However, the appeal of Berlin-based GSW for Deutsche Wohnen is clear: Berlin’s residential market is booming, with rents increasing in some parts of the city by more than 13% last year alone. In addition the takeover would significantly boost the size of Deutsche Wohnen’s portfolio by around 60% to 147,000 units, just slightly less than Deutsche Annington, which leads with almost 180,000 units.

Together the two residential companies would have a portfolio valued at almost €8 bn.

On Monday, GSW Immobilien announced that it was is in the process of 'thoroughly' analysing the proposed offer. 'With regard to certain key aspects of the offer further clarification is required,' the company said in a statement. GSW has engaged Goldman Sachs, Citigroup and Kempen & Co. as financial advisors to analyze the offer, while Hengeler Mueller has been engaged as legal advisor.

Deutsche Wohnen is expected to publish full offer documents regarding the potential €1.75 bn takeover after its extraordinary shareholder meeting on September 30. The takeover offer comes with a prerequisite that its shareholders approve the necessary capital increase at that meeting.

Under the terms of the offer, Deutsche Wohnen proposes acquiring no-par value bearer shares in GSW by way of an exchange offer, each representing a pro rata amount of the registered share capital of €1.00. In return for 20 GSW-shares tendered to Deutsche Wohnen, it would offer 51 newly issued no-par value bearer shares as consideration. In the event of all GSW shareholders accepting the exchange offer, they would hold nearly 43% in the greatly-enlarged Deutsche Wohnen.