Hedge fund revolt causes chaos on the board of directors

Aareal Bank

Three seats on the supervisory body remain empty for the time being.

(Photo: PR)

Frankfurt Hardly any investor expected such a result at the extraordinary general meeting of the real estate financier Aareal Bank: The activist investor Petrus Advisers, who is one of the largest individual shareholders of the institute, was able to prevail by voting out a total of three supervisory boards of the institute. But there was also no majority for his own candidates.

The result: three seats on the supervisory body remain empty for the time being. The current chairman of the supervisory board, Hermann Wagner, announced that the company would “quickly” fill the vacancies that have arisen within the statutory deadlines.

Wagner had only taken over the chairmanship of the supervisory body on November 24th from Marija Korsch, who had been the chairman of the supervisory board for many years. Korsch used the agreement between Aareal Bank and a group of investors on a takeover offer as an opportunity to resign.

Even then it was clear that things could get tight for the former banker at the general meeting on Thursday: Most recently, many hedge funds had increased their shares in the Wiesbaden real estate financier. And Korsch, who was still a simple member of the supervisory board, was one of the supervisory board members, along with Christof von Dryander and Dietrich Voigtländer, who Petrus Advisers wanted to have voted out of office.

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In May, the London hedge fund failed to address this issue. This time he was more successful: the shareholders voted out the three members of the supervisory body with around 55 percent of the vote.

Small shareholders are upset

However, the attempt to replace those who had been voted out with their own candidates failed: the election of the proposed replacement candidates Heinz Laber, Marion Khüny and Joachim Sonne failed. 56 percent of the shareholders each voted against.

Marija Korsch

In the second attempt, Petrus Advisers succeeded in removing the long-time supervisory board director and two other members of the supervisory body.

It is unclear who Aareal Bank will be bringing to the supervisory body as a substitute. In contrast, it is now clear what demands the group of investors around Advent and Centerbridge would make in the event of a successful takeover: The shareholders learned that they wanted to be represented on the supervisory board in future according to their majority.

Since there are only four employee representatives on Aareal Bank’s twelve-member Supervisory Board, the representatives of the capital side still have a majority vote in the body even after three of their members have left.

The Annual General Meeting had lost its original purpose even before it began: Aareal Bank actually wanted to have the second part of a dividend voted on at the extraordinary shareholders’ meeting. But with a view to an impending takeover offer from a group of investors, the board had taken this item off the agenda again – to the annoyance of many small shareholders.

The takeover offer provides for a price of 29 euros per Aareal Bank share – on the condition that no further capital, for example in the form of a dividend, flows out of the company. If enough shareholders offer their share certificates – the required acceptance threshold has been 70 percent so far – then the financial investors do not want to distribute any dividends at all, so that Aareal Bank can use the money for growth investments.

Even if the offer failed, however, it is not certain how high the institute’s outstanding dividend would be. The board of directors is examining whether it would create more value for shareholders if it pays a lower dividend, stated CEO Jochen Klösges and CFO Marc Hess during the shareholders’ debate.

More: Marija Korsch: The consistent farewell to Aareal Bank’s chief supervisor

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