FRANKFURT/VIENNA Germany's biggest residential property firm Vonovia (VNAn.DE) has agreed to buy smaller Austrian rival Conwert for around 2.9 billion euros ($3.2 billion) including debt, adding to a flurry of European real estate deals as companies look to build scale.
Vonovia said on Monday buying Conwert, which focuses on residential property in Germany and Austria, would create a group with 367,000 flats, up from its current 340,000, and give it properties in the developing German city of Leipzig as well as in Berlin, Potsdam, Dresden and the Austrian capital Vienna.
It said it would offer 74 of its shares for every 149 Conwert shares, implying a price of 17.58 euros per Conwert share based on Friday's close.
That is a 24 percent premium to Conwert's volume-weighted average stock price over the last six months. Alternatively, shareholders can choose to receive 16.16 euros cash per share.
Excluding debt the share offer, which is conditional on acceptances above 50 percent of capital, is worth around 1.8 billion euros.
At 1025 GMT, Conwert (CONW.VI) shares were up 5.3 percent at 17 euros, while Vonovia's were down 2.3 percent at 34.58 euros.
Bernhard Ruttenstorfer, a fund manager at Erste Asset Management/Ringturm, Conwert's sixth biggest investor with a stake of around 2 percent, said the offer looked attractive considering recent gains in Conwert's share price.
But he said he would need to take a close look at expected synergies before deciding whether to accept it.
Vonovia said it saw financial and operational synergies of around 12 million euros.
CHANGE OF HEART
Europe's property sector has seen a flurry of deals, with low interest rates prompting investors to pour more cash into real estate in search of higher returns and companies looking to bulk up.
Recent deals have included Patrizia Immobilien buying a portfolio from Scandinavian real estate funds for 880 million euros and Adler Real Estate taking over Westgrund for 790 million euros.
Vonovia failed earlier this year in a bid to buy Deutsche Wohnen (DWNG.DE) and Chief Executive Rolf Buch had repeatedly said the company did not need further acquisitions after buying some smaller peers including Gagfah and Suedewo.
But Buch said on Monday recent improvements at Conwert had led to a change of heart.
The Austrian group's shares have gained almost 40 percent over the past 12 months following a campaign by activist shareholders which led it to take steps to improve its vacancy rates, portfolio structure and the interest rates it has to pay.
Its leading critic, Adler Real Estate (ADLG.DE), said on Monday it had agreed to tender its stake of around 26 percent in Conwert for Vonovia shares.
UBS analysts said the offer price seemed reasonable, at 1,336 euros per square metre or an 18.2 multiple. "The reason for the deal is clear: opportunities are scarce in the private market, so 'why not' buy Conwert," they wrote in a note.
Conwert's headquarters will remain in Vienna, and it will remain listed on the Vienna Stock Exchange, Vonovia said.
(Editing by Balazs Koranyi and Mark Potter)