Way looks clear for Deutsche Wohnen / GSW mega-merger
Whatever happens in the planned merger between the two German listed residential operators Deutsche Wohnen and Berlin’s GSW Immobilien AG, one shareholder in Deutsche Wohnen who won’t be around as it plays out is giant private equity group Blackstone.
Blackstone had become a de factor shareholder in Deutsche Wohnen in April following a a transaction in which Deutsche Wohnen bought 6,900 apartments from Blackstone, all located in and around Berlin. The price of about €400m was part-payable in Deutsche Wohnen shares, trading at that time at €13.41. Blackstone ended up with 4.8% of Deutsche Wohnen equity. Last week it sold off its €107m shareholding completely, with UBS placing the 8.15m shares privately (and quickly) at about €13.10 according to Frankfurt traders. The sale was ‘for purely technical reasons’ said a Blackstone spokesperson.
Deutsche Wohnen’s shareholders are voting this week (30th September) on whether to approve a capital increase to finance the takeover of GSW Immobilien. A majority of 75% of GSW shareholders must tender their shares for the deal to go through following an official takeover bid. Deutsche Wohnen made the all-share bid last month stating its intention to create a leading German residential firm with around 150,000 housing units, heavily weighted towards the German capital Berlin, and a portfolio valued at €8.5bn.
It is offering 51 Deutsche Wohnen shares for every 20 GSW shares, valuing the latter at €1.75bn. “We are convinced of our offer and are hopeful about the process,” Deutsche Wohnen spokeswoman Manuela Damianakis told news agency Bloomberg in a recent statement. If all GSW shareholders accept, they will hold 43% of the new business, with the old Deutsche Wohnen shareholders owning 57%.
Separately, as we reported in recent REFIRE, there has been some disquiet among GSW shareholders that the Deutsche Wohnen shares newly created for the bid will pay no dividend in 2013. Both GSW itself and several analysts have commented that a merger would make “a lot of operational and industrial sense”. Since the merger offer, both companies’ share prices have fallen back marginally while the MDAX has risen by about 2.5%.
Whatever happens, the deal is unlikely to be completed this year given regulatory hurdles, but very probably in early-2014 if all agree. The cartel office has already given the green light. Deutsche Wohnen institutional shareholders, such as Sun Life Financial, BlackRock and Credit Suisse are also thought likely to give their support to the deal.
Postscript: Shareholders at Deutsche Wohnen’s extraordinary general meeting this week voted 99.5% for the capital increase through the issue of new shares to fund the takeover. Chairman Michael Zahn commented: “We’re very happy at the clear vote of our shareholders, who made an important decision today. They see the added value in a merger of both companies – now it’s up to the shareholders of GSW Immobilien. By pooling both our portfolios and concentrating on the growth market of Berlin, we can make optimum use of our strengths and potential.”
Zahn believes that efficiencies of €25m annually can be achieved after at most two years. Merger costs are likely themselves to be €25m, analysts believe. Zahn also said that Deutsche Wohnen had already had discussions with over 100 larger GSW Immobilien shareholders, whose attitudes to the proposed merger were “extremely favourable”.