Deutsche Wohnen Urges Vonovia Investors to Stop Hostile Takeover

  • In letter, CEO sees `long, drawn-out' fight if bid proceeds
  • Zahn encourages Vonovia shareholders to invest in his company

Deutsche Wohnen AG Chief Executive Officer Michael Zahn plans to publish a personal appeal to Vonovia SE shareholders on Monday, urging them to vote against that company’s planned takeover of Deutsche Wohnen and buy stock in his company instead.

The letter, a copy of which was obtained by Bloomberg News, is the latest attempt by Germany’s second-biggest residential landlord to fend off a 9.9-billion euro ($10.6 billion) bid by Vonovia, the industry leader. In the letter, Zahn calls the deal “value destructive,” and warns of a “long, drawn-out and potentially extremely expensive process” even if Vonovia investors allow the bid to proceed at their extraordinary shareholders meeting on Nov. 30.

“You can expect us to do everything in our power to protect our own shareholders against this value-destroying takeover attempt,” Zahn says in the letter. Vonovia shareholders who want to benefit from Deutsche Wohnen’s growth potential should buy its stock instead, he said. “We would be delighted to welcome you as our shareholder.”

Nina Henckel, a Vonovia spokeswoman, said the company made “an attractive offer,” while declining to comment on Zahn’s letter.

“It’s up to shareholders to decide on Nov. 30 whether to vote for the deal,” Henckel said.

Residential Demand

German residential landlords have bought apartments and listed competitors in record volumes in the past two years as they seek to take advantage of favorable financing conditions, rising rents and growing demand for affordable apartments in large German cities. Vonovia owns 370,000 homes in cities such as Dresden and Berlin, while Deutsche Wohnen has 144,000 units, most of which are in the German capital.

In the letter, Zahn said that even if Vonovia investors approve, it’s unlikely that a sufficient majority of his shareholders will offer their shares, which could result in a long battle for control.

Zahn also repeated his assessment that Vonovia won’t be able to deliver the annual synergies of 84 million euros it has promised, and that high tax and financing costs resulting from the deal will reduce profits at the combined company by as much as 30 million euros per year.

“This is not an attractive prospect for Vonovia shareholders,” he said. “You should reject the proposed transaction in order to protect the value of your current investment in Vonovia.”

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