Deutsche Wohnen investor says Vonovia’s higher offer is still “unfair”

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Deutsche Wohnen AG update

One of the largest shareholders of German landlord Deutsche Wohnen attacked the sweet offer made by rival Vonovia, saying that its 18 billion euro bid continued to underestimate the company’s value.

Vonovia announced on Sunday evening that it plans to make a revised bid for Deutsche Wohnen at 53 euros per share, 2% higher than the original all-cash bid of 52 euros per share that was rejected last month.

But Michael Muders, fund manager of Union Investment, Germany’s third-largest asset management company, told the Financial Times on Monday that the improved offer was still “unfair” because it did not reflect the true asset value.

Vonovia’s first method collapse At the end of last month, it almost failed to meet the requirements for shareholder support. Vonovia’s hostile takeover was rejected in 2016.

The revised offer is again subject to a minimum acceptance rate of 50% by Deutsche Wohnen investors. But in recent days Vonovia has increased its shareholding ratio to slightly less than 30%, which means it needs to influence another 20% of shareholders.

Deutsche Wohnen support Proposed transaction, Which will create a group of 500,000 apartments in Germany and nearly 90 billion euros worth of properties in Sweden and Austria. Both companies stated that the transaction will save 105 million euros in annual costs.

Muders stated that the higher offer still does not fully reflect the basic value of Deutsche Wohnen’s real estate assets, does not include the control premium, and will not share cost savings with Deutsche Wohnen shareholders.

Union holds a 2.5% stake in Deutsche Wohnen, making it one of the owner’s largest shareholders. Last month, it rejected Vonovia’s first bid.

Both Deutsche Wohnen and Vonovia rejected the criticism, pointing out the fact that the sugared offer meant a 17% premium to the target company’s undisturbed share price.

Deutsche Wohnen added that the dialogue with shareholders showed that the vast majority of investors support the acquisition.

Muders argued that the book value of the Deutsche Wohnen property is outdated because it does not reflect the landmark court decision in April that removed the highly controversial rent ceiling imposed by the local Berlin government.

As of the end of March this year, Deutsche Wohnen reported that its net asset value was 52.50 Euros per share. But Mudds insisted that the value of Berlin’s property had increased due to the court’s ruling.

He said that he estimated that the net asset value per share was about 56 Euros. “For the management of Deutsche Wohnen, whether the interests of shareholders are still the highest priority, we are very uncertain,” he added.

Deutsche Wohnen said that it will release its latest estimate of net asset value and half-year results on August 13.

“The price of 53 euros per share is slightly higher than the expected net tangible assets,” it said, emphasizing that previous calculations have been based on the assumption that the rent ceiling is unconstitutional and will be banned. Therefore, the court’s ruling “does not require changes to valuation assumptions or Deutsche Bank’s prospects”, it added.

Vonovia CEO Rolf Buch told the Financial Times that “the first bid did not fail because of the price.”

As of Monday’s midday trading, Vonovia’s share price has risen 1.2%, while Deutsche Wohnen’s share price is flat, slightly below 53 euros.

Vonovia expects the German financial regulator BaFin to approve the revised bid before the end of this week.

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