By Peter Dinkloh
FRANKFURT (Reuters) - German Real estate company GSW
The proposed all-share deal would push Deutsche Wohnen closer to the top five European real estate firms by market value by growing its portfolio in Berlin's booming rental market, where it is tapping increasing interest from international investors.
"We consider the business combination as a convincing opportunity to pool the strengths of the two companies," GSW said in a statement.
"The Management Board and the Supervisory Board consider the exchange ratio of ... shares ... as fair from a financial point of view," it said, adding that investment bank Goldman Sachs had agreed to that assessment in a so-called "fairness opinion".
Both companies are also trying to persuade investors into accepting the offer of 51 Deutsche Wohnen shares for every 20 shares in GSW, which runs until midnight on October 30, by promising to raise dividends from 2015.
The payout ratio would rise to about 60 percent of funds from operations (FFO) from 50 percent, starting with the dividend to be paid for next year, the companies said.
That takes the payout ratio closer to the 65 percent of FFO GSW is aiming for, but remains below the 70 percent planned by Deutsche Annington
The enlarged group, which already has antitrust clearance for the combination, would continue its growth strategy in Berlin and would also seek access to other dynamic regions, GSW said, without being more specific.
Deutsche Wohnen Chief Executive Michael Zahn will remain in his position, while GSW Co-CEO Andreas Segal will become chief financial officer at Deutsche Wohnen.
The acquisition could be completed before the end of the year if enough shareholders tender their shares, Deutsche Wohnen said and would be Germany's second-biggest residential real estate deal since Whitehall bought LEG Immobilien for 3.4 billion euros in 2008.
The tie-up would increase Deutsche Wohnen's portfolio of flats by around 63 percent to more than 147,000, pushing it into second place behind market leader Deutsche Annington with 179,000 apartments.
(Additional reporting by Ludwig Burger; editing by David Evans)