Vienna Property Deal Nears Endgame 

(Bloomberg) -- An electrician-turned-investor may hold the key to untangling Austria’s commercial property market.

Ronny Pecik, a Croatian-born son of immigrants who got rich with timely takeover bets, last month led the acquisition of a 10% stake in S Immo AG. The move puts him in a position to remove the obstacles that scuppered a merger with larger rival Immofinanz AG after 17 months of fruitless talks, and facilitate a sale or a breakup of the company.

The messy relations between Austria’s real estate heavyweights, which have been in on-and-off talks in various combinations for a decade, have held back consolidation and kept outside investors at bay. While all of them have said they would do better if they were bigger, all attempts to merge in various combinations have so far failed.

“Pecik wants to get a deal done by assisting whoever in taking over S Immo,” said Christoph Schultes, an analyst at Erste Group in Vienna. “It’s no surprise that investors are interested in S Immo, since it has not only an attractive portfolio,” but also land plots and stakes in competitors that aren’t fully reflected in the share price, he said.

S Immo, Immofinanz and CA Immobilien Anlagen AG were all spun off by Viennese banking groups before the last financial crisis. The property companies emerged from the mayhem with ownership and governance issues; Immofinanz nearly collapsed in the process.

CA Immo eventually got an outside investor in Starwood Capital last year. S Immo and Immofinanz, already each other’s biggest shareholders, ended merger talks last month as managements disagreed over terms for what would have been a 4 billion-euro ($4.5 billion) deal.

“Both Immofinanz and S Immo know they need to gain in size if they want to compete internationally, but the whole thing has become very complex with many players and many different personalities,” said Wolfgang Matejka, who manages almost 1 billion euros at his namesake asset management company in Vienna. “So it may be tough to find a viable way to move forward.”

S Immo Chief Executive Officer Ernst Vejdovszky said in an emailed response to questions that any deal with another company would have to be analyzed thoroughly and not executed at any price. Immofinanz said it still had various options for its S Immo stake, even though the merger talks failed.

Enabling Deals

Pecik has kept his cards close to the chest and declined to be interviewed for this article. While it’s unclear what he plans to do with the stake, he has a track record of enabling acquisitions by third parties by secretly buying large company stakes and turning them over within months.

The last such case was none other than S Immo itself. Pecik teamed up with another investor to buy out large shareholders and eventually sell 29% to Immofinanz last year. Companies he targeted over the last two decades include Telekom Austria AG, Austrian steel and industrial groups Boehler-Uddeholm and VA Tech, and Switzerland’s Oerlikon, Sulzer, Ascom and Saurer.

Crucially, Pecik’s stake wields outsize influence at S Immo. That’s because of a 15% voting rights cap that limits the power of 29% shareholder Immofinanz and gives Pecik decisive votes at the company’s next general meeting.

If Pecik backs Immofinanz, the cap may finally be lifted, an effort that failed twice in the past two years because the stake’s former owner Vienna Insurance Group AG rejected it. Such a scenario could resuscitate Immofinanz’s takeover plans as well as making it more attractive for an outside buyer.

International players such as Unibail-Rodamco-Westfield could be interested in S Immo, according to Matejka, the fund manager. Another possible deal could be made with Pecik’s co-investor in the S Immo stake, Norbert Ketterer, who controls Frankfurt-based Gateway Real Estate AG. Gateway is about half the size of S Immo in terms of market capitalization and has a complementary focus that could make the two companies a good fit.

Ketterer also has a significant stake in Corestate Capital Holding SA, a Luxembourg-based real estate investment company with a market value of 698 million euros. The company could also be a fit for S Immo.

“Pecik certainly has a plan, and it’s possible that Ketterer is playing a big role in that plan,” Matejka said. “I would expect details to emerge before S Immo’s next shareholder meeting.”

To contact the reporter on this story: Matthias Wabl in Vienna at mwabl@bloomberg.net

To contact the editors responsible for this story: Boris Groendahl at bgroendahl@bloomberg.net, Andrew Blackman

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