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Deutsche Wohnen:Minority shareholder buyout (DPLTA): Difference between revisions
Deutsche Wohnen:Minority shareholder buyout (DPLTA) (view source)
Revision as of 14:27, 25 September 2024
, 25 September 2024→Upsides and Risks To Exchange Price
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I still think Vonovias main reason to complete the takeover is bring down their LTV ratio, which is currently, as of H2 2024, standing at a very high [https://www.vonovia.com/en/investors/latest-publications#analystpresentation 47.3%] (presentation p. 10) while Dt. Wohnen has a LTV of 30% (p.2) As a reminder Vonovias bond covenant is at 60%. At this threshold, creditors could size assets and force sell them. | I still think Vonovias main reason to complete the takeover is bring down their LTV ratio, which is currently, as of H2 2024, standing at a very high [https://www.vonovia.com/en/investors/latest-publications#analystpresentation 47.3%] (presentation p. 10) while Dt. Wohnen has a LTV of 30% (p.2) As a reminder Vonovias bond covenant is at 60%. At this threshold, creditors could size assets and force sell them. | ||
'''''Reduced operational costs and allows control over Deutsche Wohnen's cash''''' | '''''Reduced operational costs and allows control over Deutsche Wohnen's cash and properties''''' | ||
If Vonovia doesn’t provide an attractive compensation, Elliot Investment (which has 3% stake) will probably hold on to its shares. This will be a constant headache for Vonovia whenever it wants to borrow funds from Deutsche Wohnen as seen in the [https://www.reuters.com/business/elliott-seeks-investigation-into-loan-by-deutsche-wohnen-vonovia-2023-05-22/ past]. I also assume that Vonovia wants to exert control over Deutsche Wohnen’s cash before a turnaround in German real estate sector fully materializes. This should improve their ability to borrow, which would lead to less pressure to sell property and allow them to seize buying/development opportunities if they arise. Furthermore, a good/fast takeover will clear one major time-consuming issue for management and there will be less expenses for having duplicated functions in accounting, investor reporting etc. and all remaining synergies from the merger can be realized. | If Vonovia doesn’t provide an attractive compensation, Elliot Investment (which has 3% stake) will probably hold on to its shares. This will be a constant headache for Vonovia whenever it wants to borrow funds from Deutsche Wohnen as seen in the [https://www.reuters.com/business/elliott-seeks-investigation-into-loan-by-deutsche-wohnen-vonovia-2023-05-22/ past]. I also assume that Vonovia wants to exert control over Deutsche Wohnen’s cash before a turnaround in German real estate sector fully materializes. This should improve their ability to borrow, which would lead to less pressure to sell property and allow them to seize buying/development opportunities if they arise. Furthermore, a good/fast takeover will clear one major time-consuming issue for management and there will be less expenses for having duplicated functions in accounting, investor reporting etc. and all remaining synergies from the merger can be realized. | ||
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To achieve a squeeze-out, Vonovia's voting rights in Deutsche Wohnen would need to exceed 90%. This will result in [[Deutsche Wohnen:Minority shareholder buyout (DPLTA)#What Happens If Some Shareholders Don.27t Take Part in DPLTA.3F|1 billion euros]] state tax. I assume that Vonovia would want to avoid this until there is a complete pick up in the German real estate sector. Hence the best thing to do is offer attractive compensation that will likely lead to elimination of all minority shareholders at the DPLTA stage. | To achieve a squeeze-out, Vonovia's voting rights in Deutsche Wohnen would need to exceed 90%. This will result in [[Deutsche Wohnen:Minority shareholder buyout (DPLTA)#What Happens If Some Shareholders Don.27t Take Part in DPLTA.3F|1 billion euros]] state tax. I assume that Vonovia would want to avoid this until there is a complete pick up in the German real estate sector. Hence the best thing to do is offer attractive compensation that will likely lead to elimination of all minority shareholders at the DPLTA stage. | ||
'''''Deutsche Wohnen's NAV is closer to that of Vonovia''''' | |||
During Vonovia's takeover of Deutsche Wohnen in 2021, NAV was used as a valuation method. Likewise, during Deutsche Wohnen-GSW DPLTA in 2014, the valuation expect had to compare the computed enterprise value with NAV to ensure that it was reasonable. Vonovia and Deutsche Wohnen could also employ just NAV during the DPLTA. Since Deutsche Wohnen and Vonovia had a NAV of EUR 42.01 and EUR 44.08 respectively at the end of June 2024, an exchange ratio of 1:1 is possible. | |||
=== Risks === | === Risks === | ||
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'''''Risk Vonovia stock price falling''''' | '''''Risk Vonovia stock price falling''''' | ||
* Regardless of how exactly the exchange ratio turns out a falling Vonovia stock price is certainly a possibility and risk. This risk could be high given the recent surge in stock price and if the | * Regardless of how exactly the exchange ratio turns out a falling Vonovia stock price is certainly a possibility and risk. This risk could be high given the recent surge in stock price and if the German property sector would develop badly for example due to an economic downturn. | ||
== How Does DPLTA Works? == | == How Does DPLTA Works? == | ||