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Vonovia Makes Surprise Move on Rival’s Biggest Shareholder

Vonovia Comes to Rescue of Its Rival’s Biggest Shareholder

Germany’s largest real-estate company is moving in on an embattled rival that’s come under attack from short sellers.

Vonovia SE provided a loan of more than 100 million euros ($115 million) to Adler Group SA’s largest shareholder Aggregate Holdings SA that allows it to pay off an outstanding margin loan related to its stake. Vonovia also secured an option to buy about 13% in Adler at 14 euros a share, which it can exercise in the next 1 1/2 years. Adler’s shares whipsawed in Friday trading. 

Adler was created last year after a controversial three-way merger that drew fire from minority shareholders. The German landlord has been targeted by short sellers, most recently by Fraser Perring, whose Viceroy Research accused it this week of being “built on systemic dishonesty.” In the past three weeks, Adler’s shares have lost half of their value. 

“Nobody has an interest in an unstable Adler,” Vonovia said in a statement Friday.

The move helps to stabilize Aggregate, a private holding company controlled by financier Guenther Walcher, which has directly felt the effects of the attacks on Adler - one of its major holdings. Its bonds due 2025 dropped into distressed levels and were indicated at 59 cents on the euro on Thursday before rebounding to 70 cents on Friday, according to data compiled by Bloomberg.

For Vonovia’s part, it’s not clear why they’ve stepped in. The call option may be an opportunistic move on their part to acquire a major stake in the firm, should it recover. The loan, however puts them on the hook, should Aggregate fail to repay. The call option strike price is about 21% higher than Thursday’s closing level.

Adler’s shares rose as much as 13% in early trading before falling by as much as 6.8% later in the day. They were quoted at 10.9 euros at 2:32 p.m. in Frankfurt.

Vonovia’s 19 billion-euro offer for Deutsche Wohnen SE is nearing completion, with the extended acceptance period closing in. The landlord, based in Germany’s industrial heartland of Bochum, has secured more than 60% of the voting rights in its local rival in a second attempt after failing to reach a majority with a first bid.

“We can now carefully examine the real estate portfolio over the next one and a half years and decide without time pressure whether an engagement is worthwhile,” according to a statement from Vonovia. 

Adler’s shares tumbled to a record low this week after Viceroy Research’s report described the company as being a “hotbed of fraud, deception and financial misrepresentation designed to hide its true financial position, which is bleak.” Viceroy Research wrote a series of tweets on Friday that attacked the deal.  

German watchdog Bafin said it was taking the report seriously and was examining the allegations.

The landlord said in a statement Friday that all of its transactions and valuations are appraised by independent firms and that it had decided to appoint external advisers and auditors to conduct a review of the allegations. It said it planned to publish a response to other allegations made by the short seller at a later date.

Analysts at JPMorgan Chase & Co. and Kepler Cheuvreux have suspended their ratings on Adler, with the latter calling for an independent audit to examine allegations of undisclosed related-party transactions. 

Perring was one of the earliest critics of Wirecard AG, the German payment company that collapsed last year, but has also stirred controversy.

In June, Perring said Viceroy wasn’t planning to publish a report on Adler on the day rumors started circulating about a short attack. Last month, Viceroy was fined by South Africa’s regulator for publishing a misleading report on Capitec Bank Holdings Ltd.

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