€ 18bn German real estate merger collapses due to investor refusal

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Real Estate Sector News

The € 18bn acquisition of German landlord Deutsche Wohnen by rival Vonovia failed as the bidder nearly lost the level of support it needed from shareholders.

Late Friday, Vonovia announced that 47.62% of Deutsche Wohnen’s investors had accepted a cash offer that was made in late May in an attempt to create a giant real estate market that owns 500,000 apartments in Germany, as well as real estate in Sweden and Austria.

The application was subject to approval by at least 50% of the target shareholders. “This proposal is inappropriate,” Vonovia CEO Rolf Buch told the Financial Times. “This is a sad day for all of our stakeholders,” he said, adding that the deal “made sense” and was approved by Deutsche Wohnen as well as the Berlin government.

This is the second time in five years that shareholders have rejected a merger of the two companies. Investors at Deutsche Wohnen rejected Vonovia’s hostile bid in 2016.

This time, Vonovia offered 52 euros in cash per Deutsche Wohnen share and received approval for the target. This represents a 22.6% premium on the homeowner’s net worth.

The combined company would be by far the largest landlord in the German capital, where rising rents and a lack of affordable housing are one of the most pressing political issues.

In an effort to secure political backing for the deal, the two companies asked the Berlin regional government to sell 20,000 apartments and build another 13,000 apartments in the German capital.

Bukh said he still sees the deal as justified. “We will carefully assess our capabilities,” he said. Vonovia already owns 18 percent of Deutsche Wohnen and is the largest shareholder in a competitor. Butch said options included selling shares, re-offering, or buying additional shares.

A person familiar with the details told the FT that the deal was thwarted by hedge funds, which had recently established large positions in Deutsche Wohnen and did not list their shares as they later speculated on higher payouts.

Deutsche Wohnen did not immediately respond to a request for comment.

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