(Bloomberg) — TLG Immobilien AG acquired a 9.99% stake in its larger German real estate rival Aroundtown AG and started talks to combine the businesses.
TLG said Sunday the price values the potential target at 8.3 euros a share, or 10.2 billion euros ($11.2 billion). It’s paying a 10% premium to Aroundtown’s closing price on Friday. The stock has rallied about 15% since mid-August.
The potential deal comes as Berlin landlords face declining revenue because of a proposed rent cap proposed by the city’s government. It’s trying to rein in landlords after a sharp increase in living costs led to mass demonstrations. Almost half of TLG’s portfolio is in the German capital.
“We welcome working with Aroundtown towards a future merger of the two companies and creating one of the largest commercial real estate firms in Europe with a focus on top tier cities in Germany and the Netherlands,” Sascha Hettrich, chairman of TLG’s supervisory board, said in the statement.
Aroundtown says it has a commercial property portfolio worth 16.2 billion euros in addition to its exposure to the German residential market.
TLG bought the stake from Aroundtown’s largest investor, Avisco, which has an option to sell another 4.99% holding, according to a company statement.
TLG’s biggest shareholder is Israeli real estate investor Amir Dayan, who built up a 27% stake via his Ouram Holding vehicle. Ouram said Sunday it still backs the company’s supervisory board.
–With assistance from Virginia Van Natta.
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