Hmm, it is pretty interesting that Vonovia is moving instantly after the 3 years expired.
Here are some additional elements that I think we should always analyze in a deal situation like the current one to give reference.
Impact of different conversion prices for Vonovia
As of H2 2024 there have been 400.30 million Dt. Wohnen shares (p. 4). In order to completely take over the company Vonovia needs to buy 12.29% of them or 49.20 million. This equates to a price of EUR 984m at EUR 20 a share, EUR 1,280m at EUR 26 and EUR 1,574m at EUR 32.
This cost is non-cash consuming as it will be paid by newly issued shares.
There are 822.85 million Vonovia shares. (H1 Report, p. 6)
It will dilute Vonovia shareholders by 6.0% if there is an exchange ratio of 1:1 and by 4.0% if the exchange ratio would be a low 3 dt. wohnen shares for 2 Vonovia shares.
Dt. Wohnen trading volume & price action
Trading volume at Xetra,Tradegate and a few other minor exchanges has been around 3 million shares since the announcement of the buyout. This is less than 1% of total outstanding shares. It tells us that there has been no significant buying interest and no significant exits of large shareholders. (Unless there are OTC block trades)
The current price action that we are seeing might therefore be meaningless as a signal of the conversion price and could be caused for example by some speculators which potentially heard market rumors about the announcement of the buyout beforehand and are taking some profits, some minor shareholders selling, or one larger shareholder reducing his position.
Conversion Price discussion
In addition I think we should always create a section in the associated Wikiarticle which highlights upsides and risks to have a good discussion base what outcome is most likely.
Especially a strong focus and arguments on risk is important as complacency is the largest source of mistakes and fallacies for investors and to be avoided at all costs.
Upside arguments are also important and should not be missed as well.
Below are some of my arguments and open questions.
@Aron Can you create such a section in the Wiki and include my arguments and all arguments which are still missing + post your assessment here what you find will most likely happen and why and elaborate further on some arguments (either yours or mine) in more detail?
Upsides (to stock price)
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LTV is risk factor for Vonovia and merger with Dt. Wohnen will reduce it
I still think Vonovias main reason to complete the takeover is bring down their LTV ratio, which is currently, as of H2 2024, standing at a very high 47.3% (presentation p. 10) while Dt. Wohnen has a LTV of 30% (p.2)
As a reminder Vonovias bond covenant is at 60%. At this threshold, creditors could size assets and force sell them. -
Further rational for Vonovia to conclude deal quickly
Therefore I think Vonovia has a high incentive to conclude the matter swiftly and don’t have year long court procedures before they can complete the merger. In addition, having this deal completed frees Vonovia up strategically as it should improve their ability to borrow, which would lead to less pressure to sell property and allow them to seize buying/development opportunities if they arise.
Furthermore, a good/fast takeover will clear one major time-consuming issue for management and there will be less expenses for having duplicated functions in accounting, investor reporting etc. and all remaining synergies from the merger can be realized.
Risks (to stock price)
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Vonovia has higher adjusted EBT per share
The stronger adjusted EBT per share is probably the strongest argument for a worse exchange ratio. Maybe the methodology changes in reporting from FFO to EBT has been a preparational step to strengthen the basis of Vonovia? (I did not look that up yet)
Do we know if both companies use the exact same methodology after the change? How much stronger is Vonovias adjusted EBT based only on rental? (EBT on rental is more related to underlying value compared to EBT from areas like development that can be more volatile.) -
Average weighted stock price 3 months prior to buyout announcement has been relatively low
In the source that you’ve linked (p.9) it says that the average weighted stock price prior to the announcement of DPLTA agreement is important for the minimum consideration. Key are the 3 months prior to the announcement itself not the 3 month prior to the finalization of the terms and the offer. This average weighted stock price is relatively low. -
Deal cannot completed quickly or negation offer is lower than final offer
Do we know for sure which threshold Vonovia needs to reach to initiate a squeeze-out? Are we 100% sure that the 90% threshold? Here it says to use the 90% threshold the process would need to be within initiated 3 months after the merger. Maybe it is 95% in this case instead? How quickly could a squeeze out be concluded if there are lawsuits against it? Potentially all considerations from above that it would be advantageous to have a faster buyout do not matter in case Vonovia knows it will take years in any case? -
Risk Vonovia stock price falling
Regardless of how exactly the exchange ratio turns out a falling Vonovia stock price is certainly a possibility and risk. This risk could be high given the recent surge in stock price and if the german property sector would develop badly for example due to an economic downturn.
@Magaly, do we have a rough indication/project of how interest rates will develop in Europe? (Best if posted in correct topic and linked here)