Vonovia Formally Launches Tender Offer for Deutsche Wohnen

FRANKFURT—Residential real-estate giant Vonovia SE Tuesday formally launched its €14 billion ($15 billion) tender offer for rival Deutsche Wohnen AG, a deal that would combine Germany's two largest landlords.

Vonovia is offering seven of its own shares and €83.14 in cash for every 11 Deutsche Wohnen shares, valuing the target company at €26.46 per share. Deutsche Wohnen closed at €25.87 on Tuesday.

The offer begins Tuesday and closes Jan. 26, Vonovia said.

The move marks the largest hostile takeover approach in Germany since Vodafone PLC's purchase of Mannesmann AG for more than $180 billion in 2000. To succeed, Vonovia needs to get at least 56% of Deutsche Wohnen shares in the tender offer, taking two convertible bonds into account.

On Monday, Vonovia shareholders approved a capital increase necessary to go forward with the transaction.

"Our takeover of Deutsche Wohnen is a solid opportunity for us to continue to follow through on our strategy and to exploit the scalability of our platform, both in your interests and also in those of our customers," Vonovia's chief executive, Rolf Buch, told shareholders Monday, according to a published speech.

Vonovia owns and operates around 370,000 units in Germany, compared with Deutsche Wohnen's roughly 164,000 units.

While bankers expected Vonovia's shareholders would approve of the offer Monday, there remains some skepticism on whether the company can secure sufficient Deutsche Wohnen shares with its tender offer.

Deutsche Wohnen has repeatedly said Vonovia's combined cash and share bid undervalues its prospects, dilutes its portfolio quality and doesn't bring significant synergies.

Deutsche Wohnen Chief Executive Michael Zahn said in October that he saw the company's intrinsic value at €26 per share, but added a combination with Vonovia would expose shareholders to a heightened risk profile. "So we ask clearly for a risk premium," he said without elaborating further.

Write to Eyk Henning at [e-mail]

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December 01, 2015 13:25 ET (18:25 GMT)

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