Frankfurt-listed residential landlord Adler has inked a deal to acquire all the shares in Ado Group, a Tel Aviv-listed holding company and shareholder in German residential player Ado Properties, for €708 mln.
The transaction will result in Adler holding a 33% stake in Ado Properties, which has a Berlin-focused residential portfolio, and a gross asset value (GAV) of €4.4 bn.
The deal is set to create a German residential real estate business with a fully consolidated GAV of €9.4 bn. At €25.75 per share, the consideration represents a 15% discount to Ado Properties H1 2019-reported EPRA NAV.
Tomas de Vargas Machuca, Adler co-CEO said: 'This purchase has an attractive entry price below ADO Group's EPRA NAV.
'This represents a highly attractive transaction on value per square metre and a considerable discount to privately traded Berlin residential portfolios. The acquisition also provides longer-term opportunities to generate sustainable shareholder value.'
As a result of the deal, Ado will become a wholly owned subsidiary of Adler, and be converted from a public company to a private business. Its shares will be delisted from the Tel Aviv stock exchange (TASE).
Adler said that initially, the transaction will be funded by acquisition finance which the firm intends to repay by the beginning of 2020 through a combination of a rights issue, cash from the disposal of non-yielding assets, and financial debt.
Funds indirectly controlled by Apollo and Dune International, which hold around 31.96% and 19.68% of Ado respectively, hvave also voted in favour of the merger.
The acquisition price represents a premium of around 102% on the average price of Ado Group's shares on the TASE in the 30 days prior to the date of the merger agreement, and a premium of 83% on the price at close of trading on September 22.
Maximilian Rienecker, Adler co-CEO, added: 'This transaction strengthens our balance sheet and P&L. It also further enhances our capital structure and reduces our fully consolidated leverage position. Against this background, Adler will review its dividend policy for the current financial year.'