Vonovia Shareholders in Favor of Biggest German Property Bid

  • Vote allows Vonovia to make formal offer for Deutsche Wohnen
  • Buch says Deutsche Wohnen's own purchases are defensive move

Vonovia SE shareholders voted in favor of a 9.9 billion-euro ($10.5 billion) hostile takeover bid that would cement its position as Europe’s second-largest publicly traded property company. 

Investors backed a capital increase to finance the acquisition of Deutsche Wohnen AG at an extraordinary meeting in Dusseldorf on Monday. The vote allows Vonovia to make a formal takeover offer for Deutsche Wohnen, which has vowed to do everything in its power to prevent the deal from going ahead.

On Friday, Deutsche Wohnen said it’s buying almost 14,000 homes for about 1 billion euros. That deal is "simply an attempt at a defensive measure," Vonovia Chief Executive Officer Rolf Buch said on Monday.

The battle comes amid a record-breaking run of mergers and acquisitions in Germany’s real estate industry, as companies try to take advantage of rising rents, climbing home values and increased investor appetite for property stocks. Deutsche Wohnen CEO Michael Zahn says the offer undervalues his company’s growth potential and that Vonovia won’t be able to achieve the promised cost savings.

Vonovia shareholders were undeterred by Deutsche Wohnen’s resistance. Investors with more than 78 percent of the stock voted in favor of the capital increase, narrowly exceeding the required threshold of 75 percent, Vonovia said in a statement.

Buying Deutsche Wohnen makes sense, despite the transaction announced on Friday, because the properties it’s buying would fit "excellently" with Vonovia’s nationwide holdings, he said.

Europe’s No. 2

Vonovia has 370,000 homes across Germany, while most of Deutsche Wohnen’s 147,000 apartments are in Berlin. The combined company would collect more than 2 billion euros of rent per year and have a market value of more than 20 billion euros, according to a Vonovia presentation. Unibail-Rodamco SE, a shopping-mall and office landlord based in Paris, has a market value of 24 billion euros.

Vonovia fell 2.6 percent at 4:10 p.m. in Frankfurt trading, bringing the 12-month gain to 20 percent. Deutsche Wohnen rose 0.8 percent. The shares have climbed 36 percent in the past year.

Once Vonovia has made a formal offer, Deutsche Wohnen shareholders will vote on the bid. In order for it to succeed, investors with 50 percent of shares plus one must back the deal.

Deutsche Wohnen will continue to fight the bid, spokeswoman Manuela Damianakis said by phone. While the terms of the deal aren’t attractive, the company will wait for the formal takeover documents before forming a final opinion, she said.

Buch said Monday that he discussed a potential merger with Deutsche Wohnen’s management in the past, and repeated that the deal would raise Vonovia’s profitability -- as measured by funds from operations per share -- by between 1.2 percent and 3.5 percent. That would increase net asset value by 1.20 euros per share, he said.

Deutsche Wohnen’s latest acquisitions make it unlikely Vonovia will ultimately succeed with its offer, Kepler Cheuvreux analyst Thomas Neuhold wrote in a note on Monday. Accounting for the profitability added by the new homes, Vonovia’s offer "could be considered too low for many Deutsche Wohnen shareholders," said Neuhold, who has a buy rating on both stocks.

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