Germany’s biggest residential property firm Vonovia has agreed to buy smaller Austrian rival Conwert for around €2.9bn ($3.2bn) including debt, adding to a flurry of European real estate deals as companies look to build scale.
Vonovia said yesterday buying Conwert, which focuses on residential property in Germany and Austria, would create a group with 367,000 flats, up from its current 340,000, and give it properties in the developing German city of Leipzig as well as in Berlin, Potsdam, Dresden and the Austrian capital Vienna.
It said it would offer 74 of its shares for every 149 Conwert shares, implying a price of €17.58 per Conwert share based on Friday’s close.
That is a 24% premium to Conwert’s volume-weighted average stock price over the last six months.
Alternatively, shareholders can choose to receive €16.16 cash per share.
Excluding debt the share offer, which is conditional on acceptances above 50% of capital, is worth around €1.8bn.
At 1025 GMT, Conwert shares were up 5.3% at €17, while Vonovia’s were down 2.3% at €34.58.
Bernhard Ruttenstorfer, a fund manager at Erste Asset Management/Ringturm, Conwert’s sixth biggest investor with a stake of around 2%, said the offer looked attractive considering recent gains in Conwert’s share price.
But he said he would need to take a close look at expected synergies before deciding whether to accept it.
Vonovia said it saw financial and operational synergies of around €12mn.
Europe’s property sector has seen a flurry of deals, with low interest rates prompting investors to pour more cash into real estate in search of higher returns and companies looking to bulk up.
Recent deals have included Patrizia Immobilien buying a portfolio from Scandinavian real estate funds for €880mn and Adler Real Estate taking over Westgrund for €790mn.
Vonovia failed earlier this year in a bid to buy Deutsche Wohnen and chief executive Rolf Buch had repeatedly said the company did not need further acquisitions after buying some smaller peers including Gagfah and Suedewo.
But Buch said yesterday recent improvements at Conwert had led to a change of heart.
The Austrian group’s shares have gained almost 40% over the past 12 months following a campaign by activist shareholders which led it to take steps to improve its vacancy rates, portfolio structure and the interest rates it has to pay.
Its leading critic, Adler Real Estate, said yesterday it had agreed to tender its stake of around 26% in Conwert for Vonovia shares.
UBS analysts said the offer price seemed reasonable, at €1,336 per square metre or an 18.2 multiple. “The reason for the deal is clear: opportunities are scarce in the private market, so ‘why not’ buy Conwert,” they wrote in a note.
Conwert’s headquarters will remain in Vienna, and it will remain listed on the Vienna Stock Exchange, Vonovia said.