FOLLOW-UP: GSW and Deutsche Wohnen are ‘perfect fit’

Berlin-based residential company GSW Immobilien is a ‘perfect fit' for rival Deutsche Wohnen, which launched a €1.75 bn takeover bid last week, Deutsche Wohnen’s chief financial officer, Lars Wittan, has told PropertyEU.

‘GSW and Deutsche Wohnen complement each other perfectly,’ said Wittan, who is also based in Berlin. ‘Firstly, the portfolios of the two companies are a great fit as both focus on the rapidly growing Berlin market. Secondly, both companies are following a strategy aimed at sustaining the value of their properties.

'By acquiring GSW, Deutsche Wohnen will grow to a company with a market capitalisation of €4 bn and a high stock liquidity making it even more interesting for investors. This, in turn, helps us to finance further growth.'

Booming Berlin
The appeal of GSW for Deutsche Wohnen is clear: Berlin’s residential market is booming. According to JLL, median rents in Berlin currently stand at around €8 per square metre, up 33% since 2009, although in some parts of the city, prices are rising even more rapidly. ‘In Berlin we see significant population growth and an even higher increase in households, combined with low construction activity. These factors are likely to continue and translate into significant growth potential in Berlin. We think the market will stay ‘hot’ for quite some time,’ Wittan added.

A successful takeover of GSW would significantly boost the size of Deutsche Wohnen’s portfolio by around 60% to 147,000 units, slightly less than Deutsche Annington, which leads with almost 180,000 units.

On 26 August, GSW issued a statement saying that that the proposed €1.75 bn takeover ‘could make sense’ from an operational and industry perspective: ‘GSW 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 analyse the offer, while Hengeler Mueller has been engaged as legal advisor.

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

Shareholders revolt
However, the takeover 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 has appointed its remaining executive board members Jörg Schwagenscheidt and Andreas Segal as co-CEOs.

In addition, according to analysts, Deutsche Wohnen may have its work cut out trying to persuade GSW investors to accept a non-cash offer.

As part of its ‘Core+’ strategy, Deutsche Wohnen also invests in the Rhine-Main Area and regions where it sees ‘considerable growth potential’, said Wittan. ‘Having said that we will also invest in regions where we expect moderate growth. These are interesting centers in Germany, like Hannover, Braunschweig or Magdeburg as well as regions and cities in the eastern states of Germany.’

In the first half of the year, the company bought 10,700 residential units with a transaction volume of €592 mln with most properties located in Dresden (1,900 units), followed by Greater Berlin (500) and the Rhineland area (215).