Adler majority takeover of Brack Capital complete

We reported last month that German-listed residential firm Adler Real Estate was paying €540 for a stake of up to 70% in the €1.6gn Tel-Aviv listed and Amsterdam-headquartered Brack Capital Partners, indirectly controlled by prominent Israeli businessman Teddy Sagi.

This week Adler said it had received an almost 100% positive response to its offer and will now become the controlling shareholder with 69.5% of the shares of Brack.

According to Israeli business newspaper Globes, Adler signed an agreement last month to buy the controlling stake (41.4%) in Brack Capital Properties NV from Teddy Sagi at NIS 440 per share, or a total of NIS 1.4 billion. Sagi bought the shares less than a year ago for NIS 1.1 billion, so that he has made a speedy profit of some NIS 300 million (€69m).

At the time, completion of the transaction with Sagi was made conditional on Adler's success in buying between 5% and 25.8% of the public's holdings in the company in an offer to purchase at the same price. Yesterday, Adler reported that it had received positive responses from shareholders holding 51.3% of the company.

Following its positive response, Adler is buying the maximum quantity it offered to purchase (25.8%), with each shareholder who responded positively selling half of their holding. Under a previous commitment that Adler gave as part of the original transaction, it will buy the entire holdings of Brack Capital's co-CEOs Gal Tenenbaum and Ofir Rahamim, bringing its holding up to 69.5% at an investment of NIS 2.36 billion (about €540m).

Adler Real Estate AG has a market cap of €764 million, and owns more than 50,000 German residential housing units. Brack Capital is active in Germany in three main fields: rented housing units; rented commercial assets, and development and construction of residential neighborhoods. It has a portfolio of more than 12,000 rented housing units in the bigger secondary cities, including Leipzig, Bremen, Dortmund, Hannover and Kiel, generating about €45 million in annual rent, along with 317,000 sqm of commercial space for rent.

Brack Capital also engages in residential real estate development in Dusseldorf and Aachen for currently about 2,000 residential units; overall it has sold, built, and designed over 13,000 housing units. In some cities there is a strong overlap with existing Adler properties.

Adler said that it would finance the deal from its cash on hand and revenue from the sale of its share of its stake in Accentro Real Estate, along with the sale of non-core residential asset, for a total of €350m. The rest is being financed with an existing bridge loan financing agreement.

It indicated that it was not ruling out acquiring all of the public's holdings in Brack Capital in the medium-to-long term. According to Adler co-CEO Maximilian Rienecker, "This is a major step for Adler to grow further and at the same time improve both its earnings and financial standing. It will thus be greatly benefitting to the interests of our shareholders."