Hypo Real Estate acquires Irish Depfa Bank

German property financier Hypo Real Estate announced on Monday that it is acquiring Depfa Bank of Ireland for around EUR 5.7 bn. The takeover sum represents a premium of 17% on Depfa's closing price on Friday. The deal will result in one of Germany's biggest banks with total assets of some EUR 385 bn and a market capitalisation of more than EUR 10 bn.

Hypo Real will finance the acquisition in cash and through a new share issue. The takeover has yet to be endorsed by Depfa shareholders and is also subject to regulatory approval. The deal is set to be finalised by early October.

Under the terms of the transaction, Depfa will become a wholly-owned subsidiary of Hypo Real Estate but will continue to operate under its own brand and retain its Dublin headquarters. The new group aims to realise cost savings of at least EUR 60 mln per year from 2010 and a return on equity after taxes of more than 15%.

Commenting on the deal, Georg Funke, CEO of Hypo Real Estate Holding, said: 'As a result of the acquisition of Depfa, we will, at a stroke, raise our expanding public finance and infrastructure financing activities to the level and quality of a leading global player, without the otherwise inevitable start-up investments.'

Together with the announcement of the acquisition, Hypo reported pre-tax profits up 25% at EUR 355 mln over the first six months of 2007 compared with the year-earlier period. Return on equity after taxes amounted to 11.7%, compared with 9.9% for the whole of 2006. Operating revenues increased by 14% to EUR 605 mln from EUR 530 mln in the first six months of 2006. The increase was due to strong growth in new business, particularly in the second quarter.