Conwert board turns down Deutsche Wohnen offer as 'inadequate'

Austrian property group Conwert said that its administrative board has concluded that Deutsche Wohnen's €11.50 per share takeover bid is 'inadequate'.

'With regard to the offer price, the administrative board has reached the conclusion that the stand-alone value of the business per Conwert share, i.e. the value of the business without taking into account any synergies, is already above the offer price offered by the bidder,' Conwert said in a statement.

This view is also supported by an inadequacy opinion issued by JP Morgan, the company added.

Deutsche Wohnen, Germany's second-largest listed residential firm with 147,000 units, announced plans last month to acquire Austrian peer Conwert in its second major M&A deal in the past 18 months.

Deutsche Wohnen, which in 2013 took over rival GSW in a €1.75 bn all-share deal, offered €11.50 per share for Conwert. The offer values the Austrian company at about €1 bn and represents a premium of about 21.5% over Conwert's average share price over the past six months.

Shareholders
Two of Conwert's largest shareholders, Haselsteiner Familien-Privatstiftung and Karl Ehlerding and family, have committed to tender a combined stake of 25.6% in Conwert. Other shareholders in the company include Fidelity with a 5% stake and Petrus Advisers, with a 6.7% interest, according to the company website.

The offer has a minimum acceptance threshold of 50%, plus one share.

Conwert's board initially seemed to dismiss the overture last week when it suggested the offer of €11.50 per share did not reflect the full value of the company. Conwert owns €1.8 bn of residential property and around €1 bn of commercial property in Germany and Austria. A day later, however, Conwert's board clarified that it was neutral on Deutsche Wohnen's offer. Deutsche Wohnen reiterated that it would not increase its offer.

Cross-border heavyweight
If the deal is successful, Deutsche Wohnen will own some 180,000 units in Germany and Austria. Conwert owns 31,042 units in Germany and Austria and manages another 58,000 units on behalf of third parties. Its 2 million m2 portfolio is valued at €2.83 bn and includes 27,893 of residential and 3,100 of commercial units. Its largest markets outside Austria are Berlin, Leipzig and Potsdam but the company also holds a small portfolio in the Czech Republic, Slovakia and Hungary.

The deal will be financed through free liquidity and a €900 mln bridge facility which Deutsche Wohnen intends to refinance via a capital increase in the course of the year.

The group also said it intends to make a mandatory offer for shares in office property manager ECO Business-Immobilien, in which Conwert owns about 95.8%, adding it would pay €6.35 per share not already owned by Conwert. ECO shares closed at €5.18 apiece on Friday, giving it a market value of about €177 mln.

According to rating agency Moody's, which has confirmed the Baa1 rating for Deutsche Wohnen following the deal, the transaction will 'deepen the company’s core portfolio in Germany as well as provide diversification in attractive, densely populated regions with rental growth prospects'.