The Merge of Real Estate Giants Has Failed in Germany
July 29, 2021
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The result would be a reduction in renting prices.
At the end of spring, the largest German company Vonovia announced the takeover of another giant Deutsche Wohnen. The company stated that after that it would limit the growth of rent. The problem is especially acute for Berlin, where residents were even going to hold a referendum on the nationalization of housing. The contract amount was supposed to be €18 billion. However, the proposed transaction did not take place due to the refusal of Deutsche Wohnen investors.
As announced by Vonovia, by the time the waiting period expires on July 21, only 47.62% of Deutsche Wohnen investors accepted the offer to buy shares, which was made to them at the end of May. The required minimum is 50%.
If the deal had taken place, a giant in the real estate market would have been born, owning 500,000 apartments in Germany, as well as real estate in Sweden and Austria. The company would become the largest landlord in the German capital and would be able to regulate the sky-high rent growth. Therefore, both companies have offered the regional government of Berlin to sell 20,000 apartments to the city and build another 13,000 in an attempt to enlist the support of the authorities. And as a result, they really did received the approval of the Berlin government.
A person familiar with the details told the FT that the deal was thwarted by hedge funds that recently created large positions in Deutsche Wohnen and did not put their shares up for auction because they planned to speculate on higher payouts later.
What's next? This is the second time that shareholders have rejected this merger. Vonovia offered a deal to Deutsche Wohnen first time in 2016. However, the company's management does not give up. Vonovia already owned an 18% stake in Deutsche Wohnen and was the competitor's largest shareholder. Optionally, the company could sell its shares, or on the contrary, increase its share or offer a new deal. According to the latest information, Vonovia is now increasing its stake in Deutsche Wohnen and has already brought it to 30%. Then the company can make another attempt.
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