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Merger
The merger of the two companies will see the emergence of a new entity with 51,000 apartments mainly in German secondary cities and on the outskirts of the largest conurbations, making it the fifth largest residential operator in the country.
Hamburg-based residential real estate investor Adler Real Estate has capped its recent meteoric growth by seeing its path cleared to a friendly takeover of fellow residential specialist Westgrund. The merger of the two companies will see the emergence of a new entity with 51,000 apartments mainly in German secondary cities and on the outskirts of the largest conurbations, making it the fifth largest residential operator in the country.
A majority of 52.53% of Adler’s voting share capital approved a capital increase on April 29th by payment in kind from Westgrund shareholders for their holding rights. Under the arrangement, Westgrund shareholders are set to be offered 0.565 Adler new no-par value bearer shares, each with a notional interest in the share capital of Adler of €1.00, for every three Westgrund shares, plus an additional cash consideration of €9.00.
The cash component is being paid for from the proceeds of a recent five-year €300m corporate bond issued just before Easter, paying a coupon of 5.00% per annum.
The deal corresponds to a price of about €5.00 per Westgrund share, reflecting a 20% premium on the share price at the time of the announcement. Westgrund shareholders have seen their share price rise nearly threefold over the past three years, and 75% over the last twelve months.
The two companies have adopted similar strategies in the past, and share a common large shareholder in Swiss family office Wecken & Cie, which also holds a sizeable stake in Swiss Prime Site AG, one of the country’s biggest real estate investors. Adler currently has 31,000 units and Westgrund has 18,000 units, in addition to 2,700 units which were secured by Westgrund at the end of 2014.
The takeover of Westgrund will raise the new company’s holdings in Lower Saxony, North Rhine-Westphalia, Berlin, Brandenburg and Saxony, which it believes will give it scale effects in asset management and property management. It also says the larger group will generate synergies and savings as well as improved terms in regards to its capital market activities.
The new, combined balance sheet is expected to reach about. €2.4 billion with the expected market cap of the new group likely to be over €700 million. Adler, which is currently listed on the Prime Standard of the Frankfurt stock exchange, is expected to be included in the SDAX small cap index there.
