Germany’s Largest Landlords Agree $22 Billion Merger

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Analysts say the deal – which is the third try by Vonovia to swallow Deutsche Wohnen – ought to encounter few antitrust considerations in a fragmented market.

To attempt to safe political help, the 2 firms pledged to restrict common lease will increase to 1% per yr in Berlin for the following three years and to inflation-adjusted will increase for the next two years.

They mentioned the merger, which might create an organization with a mixed market valuation of about 47 billion euros, was designed to assist them work with politicians on offering inexpensive housing they usually have supplied to promote round 20,000 flats to town of Berlin.

Beneath phrases, which two monetary sources mentioned had been agreed in lower than two weeks, Vonovia can pay 52 euros per share and Deutsche Wohnen shareholders will retain the rights to a 1.03 per share dividend.

This represents a premium of about 18% on the closing worth on Friday. Shares in Deutsche Wohnen rose as a lot as 16.4% on the information delivered in an announcement after Monday’s market shut, whereas Vonovia shares fell as a lot as 6.8%.

An earlier method by Vonovia in 2016 did not win acceptance from Deutsche Wohnen shareholders for a hostile 9.9 billion-euro takeover bid.

This time, Deutsche Wohnen CEO Michael Zahn mentioned he was “very, very sure” that greater than 50% of Deutsche Wohnen shareholders would tender their shares to Vonovia, exceeding the minimal of fifty% required by the phrases of the deal.

Vonovia owns slightly below 3% of Deutsche Wohnen and can maintain round 10% by the beginning of the takeover provide, anticipated to run from mid-June to mid-July, the monetary sources informed Reuters, asking to not be named as a result of they aren’t authorised to remark.

‘NO TENANT WILL BE HURT’

In Berlin, the place rents have greater than doubled since 2008, the left-leaning authorities tried to curb lease rises with a five-year lease freeze, however the Constitutional Courtroom overturned the cap final month.

Deutsche Wohnen’s Zahn mentioned: “No tenant can be harm by this transaction.”

Nevertheless, Marcel Fratzscher, head of the Berlin-based German Institute for Financial Analysis (DIW), mentioned each teams already had appreciable affect on rents and property buy costs.

“I believe that the Cartel Workplace will take a equally vital view of this and subsequently the possibilities of a merger aren’t very excessive,” he informed Reuters.

Fabio De Masi, a parliamentarian from the left-wing Linke celebration that’s a part of Berlin’s metropolis authorities, urged the competitors authorities to dam it.

“The housing market is damaged,” he mentioned in an emailed assertion.

Even with its substantial lead over different German residential property teams, Vonovia has solely a 0.9% share in Germany’s residential market, in accordance with credit standing company Scope, which has mentioned a takeover would face few antitrust considerations.

The chief government of Vonovia cited a must make flats extra power environment friendly and extra appropriate for the aged.

“The mixture with Deutsche Wohnen now offers us the chance to successfully sort out these challenges,” Vonovia CEO Rolf Buch mentioned.

Vonovia mentioned it had bridge financing of twenty-two billion euros for the deal, to be refinanced by measures together with an 8 billion euro rights problem within the second half of 2021, following the transaction’s shut.

“It is smart strategically,” analysts at Jefferies mentioned in a observe, however mentioned the synergies had been low.

($1 = 0.8187 euros)

(Reporting by Ludwig Burger, Matthias Inverardi and Alexander Huebner; Extra reporting by Pamela Barbaglia; Christoph Steitz and Emma Thomasson; Enhancing by Dan Grebler, Kim Coghill and Barbara Lewis)



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