Vonovia Is Said in Talks on $23 Billion Deutsche Wohnen Deal

(Bloomberg) -- German residential property firm Vonovia SE is in advanced talks on a potential acquisition of rival Deutsche Wohnen SE for about 19 billion euros ($23 billion) in what would be the biggest-ever takeover in European real estate, people with knowledge of the matter said.

Vonovia is discussing a friendly purchase of Deutsche Wohnen for about 53 euros per share in cash including a 1 euro dividend, according to the people, who asked not to be identified because the information is private. The companies are prepared to address political and tenant concerns in Berlin as part of any transaction, the people said.

A deal for Deutsche Wohnen, valued at 28 billion euros including debt at Friday’s close, would rank as the year’s biggest European takeover and the largest acquisition of a German company in about four years, data compiled by Bloomberg show. It would reshape the country’s property industry, bringing together the two largest residential landlords with control of more than 500,000 apartment units.

While an agreement could be reached as soon as this week, there’s no certainty the negotiations will lead to a transaction, according to the people. Representatives for Vonovia and Deutsche Wohnen weren’t immediately available for comment during a German public holiday.

Shares of Deutsche Wohnen were up 9.7% on the Tradegate platform at 6:34 p.m. Monday in Frankfurt, giving the company a market value of about 17.6 billion euros, after earlier jumping as much as 11%. Vonovia fell as much as 1.9% on Tradegate. Both companies trade on Germany’s blue-chip Dax index.

German property companies have faced rising public pressure over the past few years over high prices, particularly in the nation’s capital. A combination between Vonovia and Deutsche Wohnen would enable significant cost savings and free up the firms to offer concessions to address political concerns, the people said.

Deutsche Wohnen faced a brief respite after a mid-April decision by the German constitutional court to overturn a controversial rent freeze in Berlin, where the company’s apartments are located. The company had a net asset value per share of 52.50 euros at the end of March, according to its latest results.

The negotiations mark the third time Vonovia has tried to acquire Deutsche Wohnen. A previous attempt failed in February 2016 after Vonovia couldn’t win enough support from Deutsche Wohnen investors. Deutsche Wohnen called that bid hostile and not in the best interests of shareholders.

Vonovia brought on advisers early last year to again consider the feasibility of a transaction, Bloomberg News reported at the time. In the end, it decided not to move forward with a bid.

Any combination would require alignment between Vonovia Chief Executive Officer Rolf Buch and his counterpart at Deutsche Wohnen, Michael Zahn, who clashed over price during the failed pursuit about five years ago. Buch has built Bochum-based Vonovia into a European property heavyweight through several acquisitions, including the 2019 purchase of Swedish landlord Hembla AB and a 2016 deal for Austrian developer Conwert Immobilien Invest SE.

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