Frankfurt The deal has been hanging in the balance for weeks. It is now clear that the takeover of Aareal Bank by a trio of financial investors will not take place. The investment companies Advent and Centerbridge as well as the Canadian pension fund CPPIB failed at the self-imposed minimum acceptance threshold. The takeover bid has thus expired and will be reversed, the bidders announced on Friday evening.
The bidding consortium had the area-Shareholders offered 31 euros per share and thus a total of 1.86 billion euros. The offer thus corresponded to a premium of 44 percent on the weighted three-month price. At the end of January, the bidders increased the purchase price by two euros per share. The financial investors had previously lowered the acceptance threshold for the deal.
The first offer stipulated that the takeover would only take place if 70 percent of the shareholders accept the offer. Most recently, the bidders wanted to be satisfied with 60 percent of the Aareal shares. Due to these changes in the conditions, the deadline for the deal was automatically extended to February 2nd.
But even after the conditions had improved, it was clear that the outcome would be close. Because the activist major shareholders Teleios Capital Partners and Petrus Advisers, who together hold more than 20 percent of the shares, had made it clear that they also consider the new price to be too low.
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In the opinion of Petrus partner Till Hufnagel, Aareal is “significantly undervalued” even with the new offer. This relates above all to the IT subsidiary Aareon, which is considered the most valuable part of the real estate financier. Advent has held a 30 percent stake in Aeron since 2020. According to Petrus, the bank and its daughter together are worth 3.2 to 4 billion euros. After the failed takeover bid, Petrus announced that he wanted to remain invested in Aareal for the long term. The activists want to continue to campaign for changes in the supervisory board. In mid-January, however, Petrus failed in court with a corresponding offensive.
Teleios founder Adam Epstein described the planned takeover as a “lousy deal for shareholders”. Investors should wait for a fair offer, which Epstein believes should be at least EUR 40 per Aareal share. Teleios also wants to stay on board with Aareal and called on the bank’s board of directors to ensure that such “obviously opportunistic” takeover bids are no longer made.
Billionaire Kretinsky involved
The consortium of bidders, on the other hand, received support from the Czech billionaire Daniel Kretinsky, who, according to data from the information service Bloomberg, controls almost eight percent of the shares in the real estate financier. According to financial sources, Kretinsky signaled earlier in the week that he would tender his shares after the bid was increased.
The share price shows that even after the offer was increased, investors did not believe that the trio of bidders would be successful. At the official close of trading on Friday, Aareal shares were trading at just over EUR 29. Despite significant price gains, the price has never exceeded the 30 euro mark since the end of January. After the failure of the takeover was announced, the price on the Tradegate trading platform fell by more than nine percent.
Aareal-Bank’s Management Board and Supervisory Board had repeatedly recommended that shareholders accept the takeover bid. “We support the offer because from a strategic point of view it is in the best interests of our company and its stakeholders,” said Aareal CEO Jochen Klösges in mid-January. In the event of a successful takeover, Advent, Centerbridge and CPPIB wanted to invest heavily in the bank and the IT offshoot Aareon. The lending business should also be expanded.
After the failed takeover, the bank wants to drive growth from its own resources. CEO Klösges reaffirmed the goal of achieving a group operating result of around 300 million euros by 2023. This level could be significantly increased again in 2024. Klösges is confident of achieving a profit as early as 2022 that will approach the level before the corona pandemic. In 2019, the group operating result was 248 million euros.
In addition, Aareal Bank plans to propose the payment of the second dividend tranche of EUR 1.10 per share, which was withheld due to the takeover bid, at the next Annual General Meeting.
More: Financial institutions are particularly common targets for activist investors