Vonovia's takeover of Deutsche Wohnen raises 'serious corporate governance concerns'

German residential giant Vonovia's new takeover bid for the shares of Deutsche Wohnen (DW) sets a dangerous precedent for German corporate governance, a key DW shareholder said on Thursday.  

Davidson Kempner, the US private equity firm which currently owns 11.4 million shares (3.2% of the share capital) of DW, is taking legal action against the acquisition and said it will hold the DW board accountable for what it believes is a questionable sale process to peer Vonovia.

According to the shareholder, the DW board has taken a number of initiatives that are 'unprecedented and legally questionable', with the sole purpose of helping Vonovia acquire control in the face of shareholder resistance to the offer terms. These include  agreeing an amended offer very quickly with a minimum adjustment to the offer terms; providing Vonovia with almost 10% of DW shares via the sale and issuance of treasury shares and finally, agreeing to waive all conditions.

'The Board has effectively handed control to Vonovia and worked around its own shareholders,'  Davidson Kempner said in a statement, adding that the measures 'severely undermines shareholder rights and in particular, their prerogative to decide on takeover offers'.

'Vonovia and Deutsche Wohnen have demonstrated that as long as the Management and Supervisory Boards of both companies want a deal to come together, shareholders' opinions and voting rights can largely be cast aside. This creates a dangerous precedent in Germany, in which Management Boards can effectively decide the fate of a company and undermine shareholder democracy,' the statement said.

The statement by Davidson Kempner is the latest twist in a takeover saga which has been going on since May. In mid-September, Vonovia announced it was waiving all offer conditions in a bid to secure Deutsche Wohnen after it failed to reach a minimum acceptance threshold set before the summer. The landlord said that the measure was being taken in accordance with its offer dated 23 August and in consultation with Deutsche Wohnen, whose board approved the merger.

The step eliminates the need to reach a minimum acceptance threshold, which Vonovia said would ensure the success of the transaction, 'in the interest of both companies' stakeholders'. The new acceptance period would end on October 21.

Vonovia currently holds just short of 30% of the Deutsche Wohnen share capital. In addition, the landlord has signed contracts with investors regarding the purchase of approximately 6% of the outstanding shares.

Together with the already tendered shares of approximately 4%, as of 13 September, Vonovia has currently secured more than 40% of Deutsche Wohnen's share capital. It will also be able to obtain an additional 4% of Deutsche Wohnen shares following the completion of the takeover offer.


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