Statement from Davidson Kempner Regarding the Deutsche Wohnen Takeover Offer by Vonovia
- 23.09.2021 04:10 pm
Davidson Kempner currently owns an aggregate 11.4 million shares (3.2% of the share capital), has been a substantial long-term investor in Deutsche Wohnen SE, one of Europe's largest property companies over many years and has engaged in an extensive dialogue with the Management during this period. Davidson Kempner has also been an investor in Vonovia.
Vonovia and Deutsche Wohnen Have Circumvented Shareholder Rights
Vonovia launched an opportunistic bid for Deutsche Wohnen and offered key members of the Management Board of Deutsche Wohnen (the "Target Board") attractive roles in the enlarged company. The Target Board has subsequently taken a number of initiatives that are unprecedented and legally questionable, with the sole purpose of helping Vonovia acquire control in the face of shareholder resistance to the offer terms.
Despite the majority of Deutsche Wohnen shareholders rejecting the original offer, the Target Board agreed an amended offer very quickly with a minimum adjustment to the offer terms. Recognising the risk that the amended offer would be rejected once again, the Target Board also included a number of measures to ensure Vonovia's success:
i. Providing Vonovia with almost ~10% of Deutsche Wohnen shares via:
a. The sale of 3.53% of treasury shares for €52/share (below the takeover offer of €53/share)
b. The sale of a further 0.93% of treasury shares at €53/share
c. The issuance of primary shares amounting to 5.17% on a fully diluted basis
ii. Agreeing to waive all conditions, which forces many shareholders to sell or tender their shares as the takeover is effectively considered as "over" prior to Vonovia even acquiring the majority support of Deutsche Wohnen shareholders. The Board has effectively handed control to Vonovia and worked around its own shareholders.
In aggregate, these measures have severely undermined shareholder rights and in particular, their prerogative to decide on takeover offers. Against a background of the conflicts of interest of certain Deutsche Wohnen Board members, this makes the situation even more disturbing and raises serious corporate governance concerns in the German market.
This is a Dangerous Precedent for German Corporate Governance
Vonovia and Deutsche Wohnen have demonstrated that as long as the Management and Supervisory Boards of both companies want a deal to come together, shareholders' opinions and voting rights can largely be cast aside. This creates a dangerous precedent in Germany, in which Management Boards can effectively decide the fate of a company and undermine shareholder democracy.
There is now a serious threat that Vonovia makes a delisting offer for Deutsche Wohnen, a large DAX company with a significant free float. A delisting provides no meaningful benefit to Deutsche Wohnen and it effectively forces many public shareholders to sell or tender their Deutsche Wohnen shares and enable Vonovia to increase its control. Many market observers and German institutions saw this aggressive measure used in the Rocket Internet delisting offer in 2020, another situation marred by material corporate governance failures.
Davidson Kempner Has Taken Legal Action and Will Hold the Board Accountable
Davidson Kempner has applied for an injunction to prevent the primary share issuance of 5.17% and the sale of 0.93% treasury shares. Davidson Kempner also reserves its rights to pursue other legal action.