Deutsche Annington to create €21b resi powerhouse via Gagfah takeover

Deutsche Annington Immobilien, Germany's largest listed residential landlord, is seeking to acquire one of its main peers, Gagfah, in a €3.9 bn shares and cash transaction.

The two companies announced on Monday that they have signed a business combination agreement.

The combined group will be Germany's largest residential landlord and one of the largest real estate companies in Europe with 350,000 residential units and a combined portfolio of €21 bn.

Rolf Buch, CEO of Deutsche Annington, commented: 'Getting the best of both worlds will be the outcome of this combination. We have agreed to conduct a fair process in the spirit of partnership. This combination is equally attractive for tenants and shareholders. We aim to create the leading company of European dimensions within the German housing market which will be more competitive and profitable, located in North-Rhine Westphalia.'

Gagfah's CEO Thomas Zinnöcker added: 'Gagfah has accomplished significant improvements in its operating and financial performance over the past 18 months which have been reflected in considerable value appreciation for our shareholders. The combination with Deutsche Annington will now offer the combined entity an opportunity for accelerated growth and further value creation while safeguarding the interests of our tenants, employees and other stakeholders.'

Deutsche Annington intends to launch a public takeover offer for all the outstanding shares of Gagfah. The consideration offered and paid by Deutsche Annington will comprise 5 Deutsche Annington shares and €122.52 in cash for 14 Gagfah shares.

Based on Deutsche Annington's share price close on the Frankfurt Stock Exchange on 28 November 2014, the combined cash and exchange offer values each Gagfah share at €18, constituting a premium of 16.1% to Gagfah's share price close.

The offer will be subject to a minimum acceptance threshold of 50% of the outstanding Gagfah shares as well as other customary conditions.

The management board of the combined company will consist of five members: the current members of the Deutsche Annington management board as well as Zinnöcker, currently CEO of Gagfah and Gerald Klinck, currently CFO of Gagfah.

The CEO of the combined company will be Rolf Buch, currently CEO of Deutsche Annington, while Gagfah's Zinnöcker will be deputy CEO.

Both Gagfah and Deutsche Annington remain fully committed to their investment and modernisation budgets for 2015 which will amount to €500 mln on a combined basis. Gagfah's board intends to support the offer and tender its shares, pending a review of the final offer document.

Gagfah's financial advisers are Bank of America Merrill Lynch and Deutsche Bank, while its legal counsel is Freshfields Bruckhaus Deringer.