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Aroundtown SA agreed to buy TLG Immobilien AG for 3.1 billion euros ($3.4 billion) in stock to create Germany’s biggest commercial landlord.
The deal values TLG shares at 27.66 euros each, 3.2% more than Monday’s closing price, Luxembourg-based Aroundtown said in a statement. A tie-up would create a company with more than 25 billion euros of assets, bringing together the deal-making acumen of Aroundtown with the development expertise and prized Berlin portfolio of TLG.
Key advantages of the merger will include cost savings, the execution of a “decent” development pipeline and the firm’s size as a listed company, “which could lead to the possibility of becoming a DAX candidate,” Baader Bank AG analyst Andre Remke wrote in a note to clients Tuesday.
Intense competition for assets has pushed German commercial real estate prices to record highs, prompting public landlords to turn to mergers and acquisitions as a route to growth. The country is set to surpass the U.K. as Europe’s most active property market, as investors bet the region’s traditional growth engine will bounce back from its current economic malaise.
“The transaction with Aroundtown is a unique opportunity for TLG to strengthen our presence in key cities in Germany as well as access new markets,” TLG said in the statement. The firm will be able to “attain a financial profile that would have been hard to achieve on our own.”
The deal will enable the firms to exploit more of the potential development opportunities in TLG’s Berlin-heavy portfolio without saddling the company with excessive debt, TLG Chief Financial Officer Gerald Klinck said in an interview last month.
The German capital has one of the lowest office vacancies and fastest growing rents in Europe. It’s on track for a vacancy rate of just 1.8% by the end of the year, according to broker Jones Lang LaSalle Inc., spurring landlords with older buildings to push ahead with redevelopment plans and seek higher rents.
TLG climbed 2.8% to 27.55 euros at 11:10 a.m. on Tuesday in Frankfurt, while Aroundtown was little changed. The merger talks started in September.
Ouram Holding SA, TLG’s largest shareholder with a 28% stake, has accepted the bid. The combined company will be renamed, but continue to have its German headquarters in Berlin.
For more details on the deal, click here
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