Alstria Office REIT AG offered to buy competitor Deutsche Office AG in a deal that values the company at about 800 million euros ($900 million). Majority shareholder Oaktree Capital Group LLC has accepted the bid.
Alstria offered 0.381 of a new bearer share for each Deutsche Office share, according to a statement Tuesday. The bid is equal to 4.41 euros per share, 12 percent above the company’s closing share price on Monday.
The deal will consolidate Alstria’s position as Germany’s biggest office company, with a combined market value of 1.7 billion euros. It would add Deutche Office properties in Frankurt -- with tenants including Allianz SE and Deutsche Telekom AG -- to Alstria’s holdings in and around Hamburg, Dusseldorf and Suttgart.
The offer must be approved by investors holding 69.6 percent of Deutsche Office shares. Oaktree owns about 60 percent, according to data compiled by Bloomberg.
“The takeover of Deutsche Office is the right step for Alstria at this point to create a strong office player in Germany,” Baader-Helvea analyst Andre Remke said in a research note. The merger will probably succeed given Oaktree’s consent, he said.
Deutsche Office gained as much as 9.2 percent in Frankfurt trading. The shares were up 8.5 percent at 4.3 euros at 11:25 a.m., valuing the company at about 773 million euros.
The acquisition will lift Alstria’s funds from operations to 75 cents a share in 2015, Alstria Chief Executive Officer Olivier Elamine said on a conference call with analysts. The company had previously forecast 62 cents.
German office investments are at the highest level since 2007, as buyers seek to benefit from the country’s growing economy and stable rental income. Spending last year rose 26 percent from 2013 to 17 billion euros, according to data compiled by BNP Paribas Real Estate.
The demand has buoyed commercial property stocks, lifting Alstria by 27 percent in the past year. Alstria shares were down 1 percent at 11.47 euros as of 11:25 a.m. in Frankfurt trading.
Alstria is sticking with its plan to pay a dividend of 50 cents per share this year and the payout may increase as the acquisition begins to boost profits, Elamine said.
While the deal will boost Alstria’s loan-to-value ratio to about 50 percent from 46 percent now, the company aims to bring the level down to about 40 percent in coming years, Chief Financial Officer Alexander Dexne said on the call.
The company expects to save 15 million euros a year from reduced financing expenses and another 2.5 million euros after combining administrative costs.
The offer period will start at the end of August, Alstria said in a presentation on its website.