Germany's Vonovia to buy Buwog in €5.2bn deal

Germany’s Vonovia has agreed to Austrian real estate group Buwog in a deal that values the company at €5.2bn.

Under the terms of the deal, Buwog shareholders will receive €29.05 in cash for each of their shares, which is a premium of 18.1% to the closing share price on Friday.

Vonovia plans to combine its residential portfolio of around 350,000 apartments with Buwog’s portfolio of around 49,000 apartments. Around 55% of apartments owned by Buwog are located in Germany, in growing cities such as Berlin and Hamburg, while its apartments in Austria are located in regional centres such as Graz, Klagenfurt, Salzburg and Villach.

Following the integration, Vonovia expects cost benefits of approximately €30m per year, which will arise from the joint management of both portfolios in Germany and Austria and are to be realised, for the most part, by the end of 2019.

Vonovia chief executive officer Rolf Buch said: “We are very pleased that our proposal has been positively received by the boards of Buwog. Buwog is an excellent fit for our company: the housing stocks complement each other perfectly in Germany and Austria. Buwog also has a leading position in the development sector. A merger of the two companies offers clear positives for tenants and shareholders of both companies."

Buwog CEO Daniel Riedl said: "Taking into account business models and portfolios, a merger of Buwog and Vonovia offers strategic advantages for both companies. The value and growth prospects of our attractive portfolio as well as our strong, successful position in the development sector will be duly taken into account in the present offer. Subject to legal and substantive examination of the offer document, we will recommend our shareholders to accept the offer."

Olivetree Financial said: "This should be a very straightforward transaction. Vonovia has been rolling up real-estate assets across Germany and Austria for some time now, and this is the latest in that long line. There is always some scope for speculation over counterbids (Deutsche Wohnen and Vonovia often look at similar assets) but Vonovia is much the larger player nowadays.

"It is hard to see anyone realistically looking to compete with Vonovia here, although the anti-trust backdrop to all transactions like this is benign. Unfortunately Buwog’s convertible bond doesn’t provide any more interesting an angle, there is no hold up value here."

At 0845 GMT, Buwog shares were up 17% to €28.90.