Vonovia returns for third attempt with improved offer for Deutsche Wohnen

After announcing a renewed takeover bid for its competitor Deutsche Wohnen, Germany's largest real estate group Vonovia presented figures for the second quarter of the current fiscal year, which sees continued growth in its main business. 

With rising rental income and acquisitions, Vonovia's profits continue rising steadily. The group had already reported an increase of 17% for the first three months of the year, with CEO Rolf Buch speaking of a "stable and predictable business".

Vonovia is in the process of making a third takeover attempt of Deutsche Wohnen, the number two in the German housing market after its most recent attempt, widely thought to be a done deal, caught the market by surprise by failing to get sufficient backing from Deutsche Wohnen's owners. Vonovia currently owns 30% of Deutsche Wohnen.

The bid fell short of the minimum acceptance threshold of 179,947,733 Deutsche Wohnen shares - around 50% of the company's share capital – by the 21st July deadline. It failed to get more than 47.6% of the share. It has since come back with this third offer, and has increased its bid by a euro to €53.00 per share.

CEO Buch said: "We remain convinced that a combination of the two companies will bring strategic and economic benefits and support housing policy goals. Our plans also have the backing of key shareholders of Vonovia and Deutsche Wohnen.

"With our renewed offer, we are providing the highest degree of transaction security and thus acting in the long-term interests of all our stakeholders. At the same time, we stand by our commitments as a reliable political partner to use our combined strength to tackle the challenges of the housing market."

Buch had already made his first takeover attempt on his competitor in 2016, when his move was opposed as 'hostile' by his rival. In his second attempt this year, he was able to get the board and supervisory board of Deutsche Wohnen on board, but not all the hedge funds involved in the company. Buch blamed them for holding out for a higher price for his failure in the second attempt as well, which failed to secure the required number of shares. 

Michael Zahn, CEO of Deutsche Wohnen added: 'A business combination based on partnership with Vonovia remains strategically compelling and will bring significant benefits. Our impression from recent discussions with our shareholders is that they also recognise this strategic logic.

"Moreover, many shareholders have regretted that the transaction was not successful. We do not want to deprive them of the opportunity to approve the business combination under improved conditions."

Vonovia had already received the green light from the financial supervisory authority BaFin for its renewed takeover offer to the shareholders of Deutsche Wohnen. BaFin had also granted the necessary exemption from the one-year lock-up period for a renewed offer, Vonovia said.

The Bochum-based Vonovia is benefiting from the fact that it is concentrating its housing stock more and more in cities with growing populations. The takeover of Deutsche Wohnen would therefore fit well into Vonovia boss Buch's vision. Deutsche Wohnen is the largest private landlord in the capital: around 114,000 of its total of more than 155,000 apartments are located in Greater Berlin.

Vonovia owns about 415,000 apartments, of which 354,000 are in Germany, making it already the largest housing company in Europe. Both companies have projected annual savings of €105m after a merger.

Deutsche Wohnen is expected to publish updated estimates of its net asset value on August 13th along with its half-year results. This will be watched carefully, as the NAV is a bone of contention among some of those shareholders in Deutsche Wohnen who did NOT agree to sell their shares into the proposed merger. 

These include Union Investment, Germany's third largest fund manager, who hold a 2.5% stake. Union Investment is arguing that Deutsche Wohnen's book value is outdated and does not reflect the landmark decision by Germany's Constitutional Court overthrowing the Berlin Mietendeckel. In Union's view, the NAV is closer to €56.00 than the stated €52.50.