German residential player Ado Properties has agreed terms for a business combination with Frankfurt-listed residential landlord Adler, which is set to create a major €8.6 bn German housing company.
As part of the deal, Ado Properties has agreed to acquire a strategic stake in German housing developer Consus, with a pipeline of German rental properties.
The deal comes three months after Adler inked a deal to acquire all the shares in Ado Group, a Tel Aviv-listed holding company and shareholder in Ado Properties, for €708 mln.
'After the successful closing of the Ado Group acquisition, the combination of Ado and Adler is the next logical step as both companies have highly complementary portfolios,' said Maximilian Rienecker, co-CEO of Adler. 'The transaction creates significant value for all shareholder groups, and will position us favourably for further accretive growth.'
However, the next step sees Ado Properties become the buyer, launching a voluntary public tender offer for all Adler shares.
The Ado bid offers 0.4164 Ado shares per Adler share, based on this year's third quarter EPRA NAVs. Rienecker explained that there had been a number of 'moving parts' in the merger plan.
'Adler shareholders were happy to reach a 51% consensus to secure the transaction,' Rienecker said in an investor call. 'It was important to have a long-term structure in place that would have the best synergies.'
The combine will be named Adler Real Estate Group and boast a €10 bn development pipeline of over 15,000 units in the top nine German cities. Adler's broader German property portfolio is seen as complimentary to Ado's Berlin-focused assets.
Ado has bought a 22% stake in German housing developer Consus from controlling shareholder Aggregate Holdings for €294 mln which compliments a 3% stake already held by Adler. A call option on a further 51% in Consus has also been secured, which Ado said would be completed in a share deal.
Thierry Beaudemoulin, Ado CEO said: 'This is an exciting and transformational combination that will ultimately create one of the largest listed residential real estate groups in Europe.
'The combination will have a high quality portfolio diversified across core German cities, with access to a market leading development platform and pipeline. We believe this combination will have a compelling growth profile, which will benefit all stakeholders and deliver value for shareholders in the short, medium and long-term.'
According to both parties, the combined company will benefit from enhanced liquidity in its shares, with a free float market capitalisation of approximately €1.8 bn, becoming a likely MDAX candidate in the near-term.
After the combined group has executed its call option to acquire control of Consus, 'significant refinancing synergies' are expected to be achieved through refinancing the debt structure, the parties said. A fully underwritten rights issue of up to €500 mln is scheduled post-closing which Ado said would 'further strengthen the balance sheet'.