Advent, Centerbridge Lower Aareal Threshold, Extend Offer

(Bloomberg) -- Advent International and Centerbridge Partners lowered the minimum acceptance threshold and extended the offer period for Aareal Bank AG after two of the German lender’s biggest investors rejected their 1.74 billion-euro ($2 billion) takeover bid over diverging views on valuation.

The offer will now be conditional on a 60% acceptance rate, instead of 70%, the bidders said in a statement on Tuesday. They also gave shareholders another two weeks, until Feb. 2, to tender their stock.

The move comes after Teleios Capital Partners on Monday said it won’t accept the proposed 29 euros per share. The hedge fund’s refusal to tender its 6% stake made it the second major investor to balk after Petrus Advisers, which has a 16% interest in Aareal. The rejections made it increasing unlikely for Advent and Centerbridge to reach their self-imposed threshold of at least 70% by Wednesday’s close.

Advent and Centerbridge now have time to consider making an improved offer, people familiar with the matter said. They are still in internal discussions about a higher bid, the people said, asking not to be identified because the information is private. Representatives for Advent and Centerbridge declined to comment.

Petrus said last week it would ignore the private equity firms’ offer that it deems to undervalue Aareal. A key point of contention has been Aareal’s software arm, known as Aareon AG, whose value investors like Petrus say is not reflected in the offer price.

Aareal resisted Petrus’s previous calls to pursue a full sale of Aareon and instead sold a minority stake in the unit to Advent, which then went on to make a play for all of Aareal with a partner. Advent regards the software business as a potential candidate for an initial public offering in the future, Bloomberg News reported previously.

Petrus estimates the fair value of Aareal’s Aareon stake alone at about 19 euros to 26 euros per Aareal share. Aareal owns 70% of the asset, after previously selling 30% to Advent.

Teleios also values Aareal higher than the offer price. “Aareal’s shareholders would be better off ignoring this tender offer and demanding fair consideration that could exceed 40 euros per share,” Teleios fund manager Adam Epstein said in an interview on Monday before the offer was revised.

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