GSW Accepts Deutsche Wohnen’s $2.3 Billion Bid for Landlord

GSW Immobilien AG (GIB) recommended that shareholders accept a takeover bid by Deutsche Wohnen AG (DWNI) that values GSW at about 1.7 billion euros ($2.3 billion). The deal would create Germany’s second-largest owner of apartments.

Deutsche Wohnen Chief Executive Officer Michael Zahn will head the new company, while GSW co-CEOs Joerg Schwagenscheidt and Andreas Segal will become chief operating officer and chief financial officer, respectively, GSW said in a statement after the market closed yesterday.

“There are opportunities that we can bring out with a combination,” Segal said by phone today. “We won’t be competing against each other any more.”

GSW shareholders must decide whether to accept an offer of 2.55 Deutsche Wohnen shares for each GSW share by midnight on Oct. 30. Both companies are based in Berlin, where price and rent increases have outpaced the rest of the country.

Deutsche Wohnen needs acceptances from investors owning at least 75 percent of GSW shares to proceed with the deal. The combined company would own about 150,000 apartments valued at 8.5 billion euros, Deutsche Wohnen said in August.

Deutsche Annington Immobilien SE (ANN) is Germany’s biggest residential landlord, with 180,000 apartments and a market value of 4.4 billion euros.

Dividend Policy

Starting in 2014, Deutsche Wohnen will increase its dividend to about 60 percent of funds from operations excluding sales, a measure of a property company’s ability to generate cash, according to yesterday’s statement.

The new company would be able to become more profitable because of cost savings and an increase in negotiating power when acquiring apartments or borrowing money, Segal said.

“Being bigger creates advantages,” he said. “We are optimistic that we can optimize our financing options further.”

The merger will lead to cost savings of about 25 million euros per year starting in about two years, when the integration is complete, Deutsche Wohnen said on Aug. 20.

Cost savings may also come from job cuts, Schwagenscheidt said by phone.

“We don’t rule out that personnel may be reduced,” he said.

To contact the reporter on this story: Dalia Fahmy in Berlin at dfahmy1@bloomberg.net

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net

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