Deutsche Wohnen Rejects Vonovia's Takeover Offer as Inadequate

  • Deutsche Wohnen remains committed to bid for LEG Immobilien
  • Offer seen undervaluing Deutsche Wohnen assets, potential

Deutsche Wohnen AG, Germany’s second-biggest residential landlord, rejected a takeover offer by larger competitor Vonovia SE and said it remains committed to its own bid for apartment owner LEG Immobilien AG.

The premium to Deutsche Wohnen’s share price “does not reflect in any way the potential in NAV growth and the high quality of Deutsche Wohnen’s real estate portfolio,” the company said in a statement Wednesday.

Vonovia offered to buy Deutsche Wohnen if the planned purchase of LEG fails. The deal would be the largest in a rental property industry that’s going through a wave of acquisitions. Vonovia made a cash-and-shares bid that equals 25.86 euros a share or 9.92 billion euros ($11.3 billion) excluding debt, the company said.

“We wouldn’t offer this alternative if we didn’t believe it’s an attractive option for shareholders and that a majority of shareholders recognize this," Vonovia Chief Executive Officer Rolf Buch said in an interview. He said he had “many” conversations with Deutsche Wohnen shareholders who supported an alternative bid.

Deutsche Wohnen shares rose 2.7 percent in Frankfurt trading as of 3:27 p.m. Vonovia was down 4.8 percent and LEG dropped by 2.9 percent.

A tie-up between Vonovia, which has 370,000 apartments across Germany, and Deutsche Wohnen, which has 144,000 units mostly in Berlin, would be the latest in an intensifying battle for size in the German publicly-traded residential industry. Homeowners’ market valuation has increased about tenfold since 2012 as new companies bought rivals and accumulated apartments. Deals have been financed with record levels of debt and share sales as companies take advantage of low borrowing costs and strong demand for real estate from international fund managers.

The bid is 9.8 percent higher than Deutsche Wohnen’s share price the day before a possible offer was reported, Vonovia said in its statement. The value of the transaction including debt is about 14 billion euros, according to the company.

“There’s a good chance Vonovia’s deal will go through,” said Thomas Neuhold, an analyst at Kepler Cheuvreux. “Vonovia’s offer is probably the more attractive of the two options, because Deutsche Wohnen shareholders will get an attractive premium, as opposed to having to pay a premium for LEG. ”

Dutch asset manager PGGM NV said Vonovia’s offer is preferable to Deutsche Wohnen’s bid for LEG because it will preserve the quality of the property company’s assets. PGGM is a shareholder in both Deutsche Wohnen and Vonovia.

(An earlier version of the story misspelled the name of Deutsche Wohnen in the headline.)

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