50 percent plus one is the magic word, whether in business or politics: whoever has the majority of votes in parliament can pass laws. And whoever owns the majority of shares in a company decides the big picture at the general meeting – and is allowed to include the company in their own balance sheet.
At first glance, it’s surprising that real estate company Vonovia claims that it doesn’t need a ’50 plus one’. Germany’s largest landlord wants to merge with Deutsche Wohnen, the largest private housing company in Berlin. Vonovia no longer ties the success of the offer to any conditions, the company said Monday evening. And you ask yourself: is anyone afraid of missing the 50% magic again?
Vonovia sees things differently, the group points to two particularities. On the one hand, the logic of the merger: Vonovia and Deutsche Wohnen want to jointly manage their 500,000 apartments in Germany in the future – for example with a uniform organization of craftsmen; it should save money. Such synergies can be exploited “largely independently” of the number of Deutsche Wohnen shareholders who now accept Vonovia’s offer, according to the company.
On the other hand, Vonovia is fairly certain that sooner or later it will acquire a majority stake in the competitor. The Bochumers themselves bought almost 30 percent of the shares in Deutsche Wohnen. Vonovia has already secured offers or commitments for an additional ten percent, the group said. And even if you cross the 50% threshold by October, Deutsche Wohnen could issue additional shares if necessary, which Vonovia – and only Vonovia – would then be allowed to buy. This is how the companies came to an agreement.
In July, the merger just didn’t hit the 50% hurdle
The two largest private owners in Germany had already decided in May to merge. Together, they could better face the challenges of the industry, hence the reasoning. Vonovia and Deutsche Wohnen refer, for example, to the construction of new rental apartments – or the billions of conversions into climate-friendly, barrier-free settlements.
In recent years, both companies have taken advantage of the fact that many people have moved to local towns and the new building was barely able to keep up with them at first. Vonovia and Deutsche Wohnen were able to increase rents in many places. Thanks to low interest rates, they can also finance themselves at a lower cost, and the value of their real estate has increased by billions.
Of course, all of this also attracts criticism. For example, an initiative in Berlin collected enough signatures that eligible voters could soon vote on the proposal to expropriate the capital’s large private landlords. As the market leader in Berlin, Deutsche Wohnen is the enemy of this campaign, while Vonovia has apartments in much more metropolitan areas, as well as tens of thousands in Austria and Sweden.
Although many investors hailed the merger plan and the Federal Cartel Office has already approved the merger, the takeover initially failed in July to just below the 50% mark. Vonovia pointed out that so-called passive investors cannot accept the offer because they own a Dax ETF, for example. The ETF can only sell Deutsche Wohnen shares when the company leaves Dax, i.e. after a successful merger. Additionally, some funds speculated that Vonovia would offer even more money per Deutsche Wohnen share at a later date; they therefore did not sell their shares initially.
Vonovia boss Rolf Buch did not hesitate and increased his bid by one euro in August – to 53 euros per Deutsche Wohnen share. Additionally, Buch has signaled that this will be the last offer. Investors obviously assume that the merger should be successful: Deutsche Wohnen was listed on Tuesday at precisely those 53 euros per share. “The book now closes the bag”, comments Marc Tüngler of the German Association for the Protection of Securities, “the drop is sucked”.