Aareal Bank confirms takeover talks with private equity groups

The Wiesbaden-Aareal Bank confirmed rumours that it is in negotiation with a group of private equity investors for a sale of the bank. The bank's share price shot up by nearly 20% when it made an obligatory response as to whether it was talking to potential buyers.

The SDAX-listed bank, which has above-average lending exposure to the hotel and office markets which have been under pressure throughout the pandemic, is also the German bank with one of the highest international lending books.

However, the jewel in its crown is its consultancy and IT subsidiary Aareon, which it has been reluctant to hive off as a standalone enterprise. New owners would be very keen to spin it off into a fully separate company and realise much more value, with IT firms being valued more highly these days than bank lenders. 

Aareal did sell a 30% stake in Aareon three months ago to private equity group Advent, who is now teaming up with fellow investors Centerbridge and Towerbrook to bid for the bank, and then subsequently carve out Aareon. 

Aareal only recently appointed a new managing director, Jochen Klösges, to the top job after his predecessor Hermann Merkens retired due to ill health. Two other hedge funds, Petrus Advisers and Teleios, who hold 9.42% and 5.06% respectively have long been pressurising the bank's management to cut overheads, spin off Aareon and boost its earning power.

So far Aareal have only issue a statement saying that "it is uncertain at the moment" if the talks will lead to a firm takeover offer, but that it is "in open dialogue" with Centerbridge, Towerbrook and Advent, with the potential buyers currently going through the books.

The share price jumped to just under €30.00 - the price which the buyers had indicated might approximate to their offer price, and puts it at about a 35% premium to the prior three-month average.