Merger wave intensifies with Deutsche Wohnen-LEG combine
Germany's wave of residential property company consolidation has intensified even further, as the biggest players rush to achieve a bigger slice of the huge market for rental housing, in which economies of scale can lead to huge boosts in profitability.
The latest mega merger is between two of Germany’s largest apartment owners, Deutsche Wohnen AG and LEG Immbolien AG, who have agreed to merge and create a bigger entity that will own and manage a portfolio of 250,000 units valued at about €17 billion. Deutsche Wohnen’s stock-for-stock deal, which LEG’s board has voted to accept, values LEG at just over €4.6 billion
The deal represents a 13% premium on the closing price of LEG stock prior to Deutsche Wohnen's announcement on September 21st. LEG has already recommended to its shareholders to accept the offer.
Thomas Hegel, chief executive at the Dusseldorf-based LEG, said: “The combination is the next logical step as both companies pursue the same business philosophy and complement each other regionally very well. This creates a strong base for a successful joint future. We are convinced that, under a single roof, we will generate significant value-added for shareholders, employees and our tenants.”
Listed on Deutsche Börse’s MDAX, Berlin-based Deutsche Wohnen currently holds 144,000 units, of which 141,900 are residential and 2,100 are commercial. LEG owns 110,000 rented residential assets, almost exclusively in its heartland of North Rhine-Westphalia.
“This is an excellent foundation to grow further together and expand our strong position in the European market,” says Michael Zahn, CEO of Deutsche Wohnen, who will run the combined company from headquarters in Berlin. Hegel will become deputy chief executive, and will join the board along with LEG colleague Eckhard Schultz.
Zahn and Hegel said in a conference call with analysts that the main future drive of the company would be to concentrate on acquisitions in North Rhine-Westphalia, Germany's most populous state. Operations in the western part of the country would be handled from LEG headquarters.
The merger will catapult the combined group to the number three spot in Europe, behind Unibail Rodamco and Vonovia, the German group recently renamed from Deutsche Annington, in terms of portfolio value.