Largest Landlord

Record Takeover in German Real Estate

Deutsche Annington headquarters Rheinterasse in Bochum, Germany. Source Deutsche Annington
Deutsche Annington's headquarters, the Rheintereasse, in Bochum, Germany.
  • Why it matters

    Why it matters

    Deutsche Annington’s takeover of Gagfah, a rival, could lead to other mergers and acquisitions in the German property market, which has been the focus of intense investor interest.

  • Facts


    • Deutsche Annington is offering €3.9 billion to buy a rival, Gagfah of Mülheim, Germany.
    • More than 51% of Gagfah shareholders must approve the deal at a January meeting.
    • The fusion would create Germany’s largest property manager with 350,000 apartments.
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Germany’s hot real estate market – one of the last bastions of affordable housing in western Europe – received a big impulse on Monday when two of the country’s largest property managers announced plans to merge in a record €3.9 billion ($5 billion) deal.

Deutsche Annington, Germany’s largest property manager, said it would buy a rival, Gagfah of Mülheim, Germany, in a transaction that would create a rental property behemoth with 350,000 apartments worth an estimated €21 billion.

To complete the transaction, more than 50 percent of Gagfah shareholders have to approve the takeover at a special meeting on January 21. Gagfah management in a joint statement with Annington said the company supported the merger offer.

Rolf Buch, the chief executive of Deutsche Annington, said the fusion would create cost-savings and better growth perspectives for the companies, which are located along the Ruhr River valley in North Rhine-Westfalia, Germany’s most populous state.

Investors were skeptical the merger would be profitable for Deutsche Annington. The company's shares fell 3% after the deal was announced while shares of its target, Gagfah, rose by 12 percent.

“This combination is equally attractive for renters and shareholders,” Mr. Buch said in a statement. “With this transaction, we want to create a leading company with European dimensions and a base in North Rhine-Westfalia that is more profitable and competitive.”

Investor interest in German real estate has grown during the financial crisis as state and local governments have increasingly sold off rental apartments to private, often foreign, investors, to reduce public deficits. The sell-off has fed the private sector boom in real estate.

Emanuele Boni, a Berlin-based Italian investor active in German real estate, said the combination of Annington and Gagfah would create one of Europe’s largest listed property managers, big enough to perhaps attract international investors.

“This deal makes sense and reflects the increasing attraction of German real estate,” Mr. Boni said in an interview. The value of German rental property is increasing by the “upper single-digit” percentage each year, Mr. Boni said, amid a housing shortage brought on in part by a lack of apartment construction over the last decade. “I expect the price appreciation to increase for the next five years, he said.

Deutsche Annington listed on the Frankfurt Stock Exchange last year after acquiring hundreds of thousands of apartments from Deutsche Bahn and energy utilities E.ON and RWE, which the companies had used to house their employees.

Gagfah listed in 2006 after acquiring public housing in Hannover and Dresden.


Deutsche Annington CEO Rolf Buch. Source DPA
The Deutsche Annington CEO, Rolf Buch, said the merged property manager planned to add, not cut jobs. Shares of Annington fell 3% after the takeover was announced. Source: DPA


Investors remained skeptical that the takeover would benefit Deutsche Annington, which is paying a 16-percent premium for Gagfah shares compared with their close on Friday. The buyer predicted that the merger would create cost-savings and efficiencies of scale of €84 million in two years.

Shares of Deutsche Annington, which is based in Bochum, Germany, fell 3.1 percent to €21.05 in Frankfurt trading after the announcement. Shares of Gagfah rose 12 percent to €17.44.

Mr. Buch, a former executive at Arvato, the printing unit of German media company Bertelsmann, is to remain chief executive of the combined company. Thomas Zinnöcker, the chief executive of Gagfah, would become deputy chief executive.

In a statement, the two companies said that they would not cut — but add — jobs following the merger, which analysts cited as one reason for the decline in Deutsche Annington’s share price.


Real estate prices on the rise_02
German real estate prices have been rising amid investor interest.


The proposed takeover is the largest in Germany since August 2013, when Deutsche Wohnen offered €1.8 billion to acquire another property management rival, GSW.

Housing ownership in Germany remains low by European and international comparison because mortgages are tightly controlled by the nation’s banks. More than two in three Germans rent apartments in a country with strict rent controls.


Kevin O’Brien is the editor in chief of Handelsblatt Global Edition. To contact the author:




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