German owner Vonovia makes € 18 billion bid for rival Deutsche Wohnen
German landlord Vonovia is set to announce a € 18 billion acquisition of rival Deutsche Wohnen in a deal that would require the backing of local politicians in Berlin’s searing housing market.
Four people familiar with the matter told the Financial Times that Vonovia would make an all-cash offer on Deutsche Wohnen, five years after an earlier attempt failed.
Vonovia will offer € 52 per Deutsche Wohnen share, valuing equity at € 18 billion, a premium over Friday’s closing price of more than 15 percent. Deutsche Wohnen also has 11 billion euros in net debt.
Deutsche Wohnen shareholders would also receive a dividend of just over € 1 per share. The payment would be funded by Vonovia’s debt.
Unlike 2016, when Target vehemently rejected the bigger rival’s approach, the deal would be backed by both companies. With a market capitalization of 30 billion euros, Vonovia is almost twice the size of Deutsche Wohnen, whose real estate portfolio is also heavily clustered in Berlin, one of Germany’s most attractive real estate markets. Both companies are members of Dax, the leading German index.
People said the potential deal, which was first reported by Bloomberg, could be announced as early as Monday evening. However, they stressed that there was still a possibility that the talks could fail. German markets were closed on Monday because the country had a public holiday
Vonovia and Deutsche Wohnen declined to comment.
The biggest potential stumbling block is regional policy in Berlin, where scarcity of supply and steep rises in rents have made housing one of the most controversial issues.
Vonovia and Deutsche Wohnen will seek to win the support of the Berlin Senate with a concessions package the two companies have worked out in recent weeks, people familiar with the matter told the Financial Times.
Companies are poised to sell a number of Senate apartments at no premium to book value, engage in a rent freeze and build additional apartments in the capital to alleviate the supply shortage.
“The two companies are trying to strengthen ties with regional politicians,” said a person familiar with the matter.
Berlin tenant groups have repeatedly accused large real estate companies of insufficient maintenance, leading to multiple complaints during below freezing temperatures this winter. Activists and tenant groups are campaigning to “expropriate Deutsche Wohnen & Co” and call on the Senate to nationalize around 200,000 apartments, most of which belong to Deutsche Wohnen.
A strict cap on rents, which was imposed by the Senate, was abolished by the German Constitutional Court earlier this year for procedural reasons.
Widespread anger in Berlin towards private developers remains high. Deutsche Wohnen, one of the city’s largest landlords, is often criticized by activists for renovating buildings and then raising rents. The company argued that its prices were still in compliance with the regulations.
Local policymakers have greeted a possible merger with skepticism. “This deal would trigger further concentration of real estate capital,” said Florian Schmidt, a green housing adviser in the booming district of Friedrichshain-Kreuzberg. “The old public apartments are once again becoming the fun thing in the financial markets.”
In 2016, in one of Germany’s biggest hostile takeover battles, Vonovia only won the backing of 30% of Deutsche Wohnen shareholders for a partly cash and partly stock offer that valued the share. company at 14 billion euros.