Deutsche Wohnen, Germany's second-largest listed residential firm with 147,000 units, has announced plans to acquire Austrian peer Conwert in its second major M&A deal in the past 18 months.
Deutsche Wohnen, Germany's second-largest listed residential firm with 147,000 units, has announced plans 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, is now seeking to further cement its position by unveiling plans to take over Conwert at €11.50 per share - a deal which values the Austrian company at about €1 bn.
The news comes just days after Germany's largest residential landlord, Deutsche Annington, closed its €3.9 bn takeover offer of Gagfah. That deal is set to create the largest listed residential landlord in Europe with a portfolio of some 350,000 flats worth around €21 bn.
Deutsche Wohnen's offer represents a premium of about 21.5% over Conwert's average share price over the past six months and a 4.8% premium to Friday's closing price. This compares to a premium of 16.1% offered by Deutsche Annington for Gagfah's shares.
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, with a minimum acceptance threshold of 50% plus one share, will be published in mid-March and also extend to convertible bonds issued by Conwert, Deutsche Wohnen said.
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 polulated regions with rental growth prospects'.
The German residential market is witnessing a trend towards consolidation because of the cost benefits, according to market experts.
‘Companies have reduced their inherited debt piles since their IPOs in 2005-2007, refinanced their debt at much better conditions, so they can now pay higher prices,' says Konstantin Kortmann, national director and team leader of residential investment at JLL in Germany. 'Subsequently, we’re likely to see further consolidation in the sector going forward,’ he added.