Vonovia and Deutsche Wohnen to combine in €18bn real estate deal

Germany’s two largest listed residential landlords, Vonovia and Deutsche Wohnen, are to combine in an €18bn all-cash deal that will create a company with more than 500,000 flats across Germany and property in Sweden and Austria.

Vonovia is offering Deutsche Wohnen shareholders €53 in cash per share, including an expected €1 dividend, which is a 25 per cent premium to its average share price over the past three months.

The deal will give shareholders “long-term strategic benefits”, said Thomas Rothaeusler, a real estate analyst at Jefferies, in a note to clients.

The transaction, announced on Monday night, is a rare combination of two listed Dax companies after the ill-fated takeover of Dresdner Bank by Allianz and Bayer’s acquisition of pharmaceutical group Schering two decades ago.

The deal is expected to generate €105m in cost synergies “from the joint management and the regionally complementary portfolios”, Vonovia said. The enlarged company said it would not cut staff numbers before the end of next year.

“Now is the right moment to combine the proven performance and strengths of both companies,” said Deutsche Wohnen chief executive Michael Zahn, who fought a hostile €14bn cash-and-share offer by Vonovia five years ago.

Both Zahn and Deutsche Wohnen finance director Philip Grosse will join the enlarged board’s executive board.

Vonovia and Deutsche Wohnen are willing to sell a significant number of residential units to the State of Berlin as part of a proposed “pact” with regional politicians to help the housing market in Berlin.

Vonovia chief executive Rolf Buch, who has been on a long-running acquisition spree, said that the deal “gives us the opportunity to effectively tackle” the challenge to increase the supply of affordable and senior-friendly apartments, and to refurbish houses to make them more ecological.

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