Investors are actively purchasing German housing bond securities.
Germany's leading real estate firm, Vonovia, aims to fully seizure its rival, Deutsche Wohnen. Already controlling 87% of Deutsche Wohnen shares, Vonovia, based in Bochum, is now pursuing the remaining percentage. An analyst proposes a value of 31 euros. Investors are swiftly flooding the market.
Vonovia's strategy to reinforce its dominance over Deutsche Wohnen, a Berlin-based company, has sent its stocks skyrocketing. Deutsche Wohnen shares surged by almost 25%, reaching a peak unseen in over two years. Vonovia, as the majority shareholder, announced its intentions the previous night to augment its control and acquire further shares, potentially entailing a boost in capital for the Bochum-based company.
Both companies have agreed to commence negotiations on finalizing a dominant position and profit/loss transfer agreement for Deutsche Wohnen, according to Vonovia. Under this agreement, Vonovia will extend an offer to Deutsche Wohnen's minority shareholders to acquire their shares, as per Bankhaus Baader's estimation of a fair value of 31 euros per share for Deutsche Wohnen shares. Given the compensation to Deutsche Wohnen shareholders, Vonovia might also need to increase its own capital. Moreover, the shareholders will receive annual remuneration as a part of the contract's duration.
The specifics of the compensation are yet to be determined. The Bochum-based company anticipates December 2024's extraordinary general meetings of Vonovia and Deutsche Wohnen to finalize the contract. Vonovia, which acquired a majority stake in the competitor, predominantly active in Berlin, in 2021, currently owns over 87% of Deutsche Wohnen's shares and now aims for more.
Vonovia had been impacted by the real estate crisis over the past few years. Factors such as high interest rates, escalating construction costs, and diminishing real estate valuations had caused a strain on the sector. However, with central banks reducing interest rates, a revival seems imminent. "Vonovia has braved the crisis," noted CEO Rolf Buch in August. Now, Vonovia is ramping up its efforts against Deutsche Wohnen. The market's reaction has been positive: Vonovia shares also saw a rise in the early trading.
Vonovia's aggressive takeover of Deutsche Wohnen has sparked discussions about the impact on Germany's economy. With Vonovia potentially increasing its capital and offering fair values to minority shareholders, the economy might witness a shift in the real estate sector. The merger could also lead to a more consolidated market, affecting rental prices and housing options for many German residents.
