German REIT Alstria gets green light to swallow €800m peer
German investor Alstria Office REIT has already effectively got the green light to taking control of a competitor, Deutsche Office (DO), in an all-share deal that values its target at €800m.
Alstria, which became Germany's first REIT when the REIT was introduced in 2007, is offering 0.38 of a new bearer share for each Deutsche Office share, which is equal to €4.41 per share, (with the share price currently oscillating around €4.30 since the takeover announcement) representing a premium of 16% over Deutsche Office's recent share price. New York-listed investor Oaktree Capital Group, which owns 60.54% of Deutsche Office, has already agreed to commit its entire stake to the deal.
In a statement, Alstria said it intends to make a public exchange offer for all outstanding shares. The exchange offer is dependent upon a minimum acceptance rate of 69.6%. If successful, the takeover will result in the creation of Germany's largest listed office real estate company. Ex-German heavyweight IVG Immobilien has a similarly-sized portfolio of holdings, but it lost its stock exchange listing last year.
The combined portfolio comprising 125 office buildings with 1.7 million sqm of lettable space will be valued at €3.5bn. The combined net loan-to-value will amount to roughly 50%, which Alstria will seek to bring down to 40% in the mid-term.
"Through the combination of both portfolios, Alstria expects to reinforce its presence in Hamburg and the Rhine-Ruhr area and to achieve a critical size in Berlin, Stuttgart and Frankfurt, giving it a critical mass in 6 of the top 7 German office markets," Alstria said in a statement.
The combination will also provide Alstria's shareholders "with access to a sizeable, profitable and well balanced office portfolio in Germany’s most dynamic growth regions while improving the group's capital market profile", it added.
Alstria expects the merger will generate cost synergies of €2.5m per annum through efficiency gains in the management and administration of properties as well as savings on the overhead functions. The cost synergies are expected to lead to an accretion of Alstria's FFO per share of more than 20%. On a pro-forma basis, this is forecast to increase from €0.62 to €0.75 per share.
According to Alstria's CEO Olivier Elamine, 'Over the past years we have prepared Alstria to take a significant step in order to become the benchmark in the listed office sector in Germany. There are numerous reasons why this transaction makes sense, however our main driver is that we are building up a stronger and better company for the benefit of all our stakeholders."
Also on a recent conference call, Alstria's CFO Alexandre Dexne confirmed that Alstria would go ahead with its plan to pay out a dividend of €0.50 this year, and offered prospects of this rising in the near term after the acquisition. The company with €1.7bn market cap would then be the fifth-biggest pure office company in continental Europe, giving it higher visibility among investors and greater liquidity
Alstria has invited shareholders to an extraordinary general meeting on 23rd July to vote on approving a capital increase and the deal itself, which would then be expected to close over the following months with the new shares listed by November.