Vonovia, Germany's biggest residential real estate company, has expressed its desire of acquiring its rival, Deutsche Wohnen, for almost $16 billion which includes the company's cash, shares and even debts.
According to nytimes.com, Vonovia's move in trying to acquire its competitor is said to be Vonovia's effort to derail Deutsche Wohnen's deal to purchase LEG Immobilien, a residential property company. The deal between Wohnen and LEG was announced last September which will result to a stronger competitor against Vonovia if successful.
Vonovia's offer is still on the table if Wohnen's shareholders rejected the proposed business with LEG. Vonovia said their offer is "more attractive and strategically sound alternative."
Deutsche Wohnen' shareholders will vote on October 28 on whether to accept LEG Immobilien's proposed deal. Wohnen's all- share offer consists of $8.6 billion including debt.
If Vonovia succeeded in acquiring Deutsche Wohnen, it will be given "the largest publicly listed real estate companies in Germany." The terms of the proposal also includes "€83.14 in cash and seven shares of Vonovia for 11 shares held in Deutsche Wohnen" for is investors. The value of each share will amount to €25.86 which sums up about €14 billion, including debt.
Rolf Buch, the Vonovia chief executive, said "We are open to a constructive discussion with Deutsche Wohnen once their shareholders have decided on the LEG Immobilien offer."
According to wsj.com [Wall Street Journal], despite of the seemingly generous offer of Vonovia. Wohnen refused the idea. They said that Wohnen is committed in acquiring LEG as Vonovia fails to see the company's true potential.
These news have different effects on the three companies. Below are the result of their disputes:
"The news lifted Deutsche Wohnen shares 1.8% to €24.63% early Wednesday, while Vonovia fell 3.6% to €27.92 and LEG dropped 3.6% to €70.3."
Analysts are torn whether Vonovia's efforts of acquiring its competitor will give them a good result. Barclays says that this deal can provide a larger "synergies" than the ones that will be built with LEG Immobilien. Others are not in sync with expressed their refusal to the outstanding deal.
Rogier Quirijns, fund manager at Cohen and Steer, which holds more than 2.5% in Deutsche Wohnen, said "From a Deutsche Wohnen shareholder perspective, we don't like the Vonovia offer. Deutsche Wohnen on a stand-alone basis or with LEG will generate significantly higher real estate returns with a lower risk profile. Besides that, we are also more critical about the possible synergy effects mentioned by Vonovia.
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