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Sector Flash - Real Estate: Vonovia to acquire Deutsche Wohnen for around EUR 18bn

Vonovia (Marketweight from Overweight); Deutsche Wohnen (Marketweight)

  • Yesterday, Vonovia, the largest German residential company, agreed to acquire the second-largest German residential company, Deutsche Wohnen, for about EUR 18bn.
  • This is the biggest-ever takeover deal in the European residential real estate market.
  • The deal will create Europe’s largest residential property group with more than 500,000 apartments.
  • Vonovia will make a voluntary takeover offer to Deutsche Wohnen’s shareholders offering EUR 52 in cash for each share. Together with the dividend of Deutsche Wohnen for FY20, which is expected to be EUR 1.03 per share, the offer corresponds to a value per share in Deutsche Wohnen of EUR 53.03.
  • The cash offer corresponds to a premium of about 18% on the closing price of Deutsche Wohnen shares on the last trading day (21 May 2021). Deutsche Wohnen’s convertible bonds are expected to be cash-settled in case bondholders exercise their change-of-control option.
  • The takeover is secured by an acquisition financing of about EUR 22.4bn. Moreover, Vonovia is planning a rights issue of up to EUR 8bn, which is expected to take place in the second half of 2021 following the completion of the transaction. In addition, debt issues (senior and hybrid bonds) of up to EUR 6-8bn are planned. The deal is expected to be closed in August.
  • We keep our marketweight recommendation on Deutsche Wohnen but change our recommendation on Vonovia from overweight to marketweight driven by the uncertainties surrounding the merger.

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