Vonovia SE (VNA) Earnings Call Transcript & Summary

And welcome, everyone, to our analyst and investor call on the new voluntary offer subject to BaFin approval that we want to launch for Deutsche Wohnen shareholders. We appreciate all of you dialing in, especially on such short notice. Today's presentation is rather short and will be followed by Q&A. And now over to you, Rolf.

Thank you, Rene, and a warm welcome also from my side. It is exactly one week ago that we had to announce that our offer fell short of the required 50% by less than 3 percentage points. The consequence was that a friendly deal has wide support that makes strategic sense and add economics and social value could not go through. The way we see it was caused by some opportunistic behavior of certain investors, combined with certain technicalities of the very complex German takeover law. But rather than to dwell on the past, I would like to look ahead. The business combination of Vonovia and Deutsche Wohnen has a competing strategic rationale. The increased scale is extremely helpful in addressing the residential megatrends. And the combined company is a much stronger partner for tenants, societies and lawmakers. It meets all Vonovia's acquisition criteria and we expect the rating agency to form second view. Because of all these reasons, we have increased together with Michael Zahn and Deutsche Wohnen that we will launch a revised offer. We have made a few tweaks that gives relaunch a very high degree of transaction certainty. Most important, the amended offer price is EUR 53 per share. As you know, we go into this new offer with a stake already just 1,000 shares below 30%. The acceptance period, a threshold of the new offer will be again 50%. And we are making a binding commitment not to implement a domination agreement with the next 3 years after closing. And to be precise, we still have a lot of companies inside the Vonovia Group, which do not have a domination agreement because often, domination agreement leads to a significant tax impacts. So this was not the plan, but now we are -- in the first, but we cleared clearly because we understood some people hoped that we were pushed to do combination agreement, which is not the case and will probably never be the case. And then there will be 2 settlement dates, one after each offer period. The launch, of course, is subject of BaFin approval to wait the 12-month blocking period. The decision whether to grant this waiver is at the full discretion of BaFin, and we expect BaFin's decision for this week. Subject to that waiver, we are looking to publish the offer document and launched the initial offer period later this month. This will result 4 weeks later in September. At this point, we will need to have cost the 50% acceptance threshold and the stake we already have counts towards the 50%. So we need another 20%. If this and all other conditions are met, we will have a first settlement for the initial acceptance period probably very early in October. This means people who tend out in the initial period will get their turns earlier. The second acceptance period will be triggered in which investors can tender their shares knowing that the offer is unconditional. We expect the settlement for the additional acceptance period towards the end of October. As I said, this translation actually makes sense from every end. Page 4 summarizes that. And I'm sure you will recognize this page from the presentation we shared in May. Everything we said then still holds through today. And, for example, by the political reaction, we have now the proof that what we said in May will be also reality. I probably do not need to go through all this again because I think the benefits are well understood. The strategy of both companies has converged and the business combination is the next logical step. The combination leads to greater scale, which enable us to better manage the residential megatrends. The portfolios are a natural fit and the larger German footprint gives us a rock-solid foundation to continue to pursue opportunities outside Germany. And finally, but clearly not last, the combined group is a strong and reliable partner for all stakeholders, not just in Berlin, but in other locations as well. And with this, over to Helene.

Good morning from me, and let's go to Page 5. The page is rather technical, but let me highlight the main points. We have agreed a new bridge financing of slightly more than EUR 20 billion to secure the transaction. And after completion of the offer, we will be looking to take out the bridge through a rights issue and the volume of which will be largely dependent on the acceptance rate as well as bonds. Also the final volume, which will also depend on whether there are change of control clauses triggered in any of the Deutsche Wohnen bonds and disposals. As Rolf already indicated, the agreement with the city of Berlin is not impacted, and the intention is to still sell 20,000 units. That has not changed. And if we need to do more to improve our financial KPIs, we can also sell up to 25,000 additional units and selected development projects. But this decision will be made at a later point in time when we know where exactly we stand after the settlement of the offer. Go to Page 6. The LTV bridge actually has not really changed. The all-cash offer will bring us beyond the upper end of our target range, and we have several mitigants to then quickly get back into the range. The rights issue -- And to be clear, we will only calibrate the volume once we know the final acceptance rate in October. The bridge on this page is calculated on the assumption of a 90% offer rate and a full volume of EUR 8 billion. Another mitigant will be the disposal of the Berlin portfolio, which should already bring us back into the corridor. And then we have further measures with additional disposals and the H2 valuation to further optimize our LTV to where we think it should be within the target range. And then with that, back to Rolf.

Helene, thank you. So it is really a short presentation today because only a few things have changed. Let me summarize the main elements. We currently own a stake just below 30%. Subject to BaFin's decision, we will expect data this week, we will relaunch a voluntary offer of Deutsche Wohnen shareholders. The offer price is EUR 53. So less than 2% more than the previous offer. The settlement is late on the year now, and so the slight increase is equivalent to a small bump, plus the part of the dividend of Deutsche Wohnen stand-alone has guided for the current year. The exceptional threshold will be 50%, including the Vonovia stake. We make a binding commitment not to implement a domination agreement business in the next 36 months after closing. And finally, there will be 2 settlement instead of one. And with this, let's go to Q&A.

Cecilia, can you open up the Q&A for us, please?

[Operator Instructions] We will now take our first question from Marc Mozzi from Bank of America.

Just wanted to clarify the structure of the few tweaks you've done on this new offer. I'm right to think that your initial offer was for 347 million shares at the beginning, meaning in the previous offer, excluding the treasury share. And now the offer will be relying on 379 million shares, so 32 million shares more, partly due to the fact that you're buying back the treasury shares, and that's Deutsche Wohnen is issuing 20 million new shares. Can you just make me think -- understand clearly how is that going to work? And are you going to effectively pay EUR 1 billion directly to Deutsche Wohnen to make sure that you're going to get access to 5.5% share into Deutsche Wohnen? Just trying to understand the station. I have a few more questions later, but just nothing with this one.

Helene, are you taking this question?

Yes, I can take this. So Marc, so in what we are buying, for sure is those first batch of treasury shares at [ EUR 52 ]. All the other agreements, which are right now sort of in place, are subject to a large number of conditions which are very, very unlikely to come into place. So the factor -- let's put it like this, we need to reach our acceptance rate. And there's a few other conditions, then we will not be purchasing those other shares.

So if I'm right, your 30% stake right now is just everything you bought on the market plus 3.5% of treasury shares. Nothing linked to the capital increase that Deutsche Wohnen will do?

Exactly. And that, as you know, and you have seen brings us to just short of 30%. So that is the market purchases plus the first batch of treasury shares that were always in the game. Maybe ...

Can you just tell us how this capital increase will work then?