Conwert sheds commercial assets in advance of Vonovia takeover
Austrian listed Conwert Immobilien, in the process of being taken over by Germany’s largest property company Vonovia, has sold a large chunk of its commercial property portfolio to an unnamed international group of investors for €335m, which it said was slightly above market value. The deal is scheduled to close before the Vonovia deal goes through, probably before the end of the year.
The package being sold consists of 36 office and commercial properties throughout Austria and Germany with about 207,000 sqm of lettable space. Conwert chairman Alexander Porschowsky said at a recent joint press conference with Vonovia that the Austrian group plans to sell about half its commercial property portfolio worth about €600m over the next 12 months, with the rest being sold thereafter.
The takeover deal with Vonovia, which both companies’ boards have agreed to, translates to a price of about €2.9bn including debt. Vonovia is offering to pay 74 of its own shares in exchange for 179 Conwert shares – equating to an offer price of €17.58, or 23.8% above Conwert’s six-month average trading price on the Viennese stock exchange. Alternatively Conwert shareholders can opt to take €16.16 in cash.
The takeover was effectively sealed when listed German investor Adler Real Estate offered Vonovia its 26.2% stake in Conwert. Adler has been agitating for change at Conwert for months, accusing it of failing to exploit its market opportunities in Germany. It recently succeeded in effecting board changes at the Austrian group, which was probably a precursor to this latest move, which offers a big premium to Conwert shareholders over anything they might have seen last year.
The deal comes six months after Vonovia aborted a four-month takeover battle to acquire Germany’s second largest housing company Deutsche Wohnen AG, while Conwert itself fended off an unwelcome €980 million takeover bid from Deutsche Wohnen at much the same time, at a price then of €11.50 per Conwert share.
The Bochum-headquartered Vonovia, which has 340,000 homes in Germany, said that the Conwert deal will further strengthens its market position in attractive regions in Germany. With the Conwert holdings the new group will have 367,000 apartments, and giving Vonovia properties in the fast-growing Leipzig as well as in Berlin, Potsdam, Dresden and the Austrian capital Vienna.
Conwert would continue to be headquartered in Vienna and retain its listing on the Vienna Stock Exchange – at least initially. Vonovia said it expects the merger to generate annual synergies of about €12m by end-2018.
The deal will definitely go through if Vonovia reaches acceptance of its offer by 50% of the shareholders, plus one share. The result will be announced on 17th November.
Vonovia’s shares have almost doubled since its IPO in 2013, in line with a major rise in the value of most listed residential property stocks in Germany over the period. The shares trade at a 21% premium to NAV, making the share price a strong transaction currency, despite having about €15.2bn of debt on its balance sheet, about the same as its market cap.
Since its IPO, Vonovia has doubled the number of homes it owns, using its shares and low-cost debt to buy housing portfolios, including rival Gagfah, but it has slowed down somewhat since the failure to swallow Deutsche Wohnen. Its loan-to-value ratio has fallen to 47% from 70% in 2010, and this should fall further after integrating Conwert. The shares are paying a 3% dividend yield.