US private equity firms Advent International and Centerbridge Partners have succeeded in obtaining the minimum 60% shareholder acceptances in order to take over Germany’s Aareal Bank.
The update came at the end of a statutory acceptance period which ran until 24 May 2022 after the bank’s management and supervisory boards recommended investors accepted the offer from "Atlantic BidCo" earlier this month.
The bank had previously rebuffed a takeover offer but changed stance after an improved price of €33 a share.
Wiesbaden-based Aareal believes final regulatory approvals will take place in the final quarter of the year or first quarter of 2023.
Aareal Bank is best known to the European real estate industry for lending to clients for large commercial property investments, across asset classes including offices, hotels, malls, logistics, residential, and student apartments.
But it has other businesses: Aareal Estate is a property management and consulting arm, while Aareal First Financial Solutions develops and implements payment transaction solutions. Deutsche Bau- und Grundstücks offers property services, and plusForta is a broker for tenant deposit guarantees in Germany.
In addition, Aareon is a Mainz-headquartered provider of software and digital solutions for the European property industry, which has been growing internationally and now has offices in nine European countries including the UK, France and the Netherlands, and a development company in Romania.
In August 2020, Advent International took a minority stake in Aareon in what was the Boston-based private equity firm’s 11th deal in the software sector and its 20th in Germany.
At the time, Advent said it would act as strategic advisor to Aareal Bank and use its expertise of investing in the DACH region and in software operational support.
Jochen Klösges, CEO of Aareal Bank, who took the role in June 2021, said of the takeover: ‘The required majority of our shareholders decided in favour of a takeover of Aareal Bank by Atlantic BidCo. For us, this means that as a result, we will be able to expedite implementation of our strategy in all three business segments, with the support of the new investors. We see the new, stable ownership structure as an advantage, especially in pursuing our sustainable long-term objectives.’
He explained the new owners had committed to supporting Aareal Bank’s strategic ambitions to strengthen its position as a leading international provider of property financings, as well as software, digital solutions and payments services based on the “Aareal Next Level” strategy – and to expedite growth in all of the group’s segments.
‘Accelerated growth will be facilitated, in particular, by combining the extensive joint experience in the financial services, software, and payments sectors, and by retaining profits in the next few years. Based on a business plan supported by the Bidder, this would generate significant additional funds for attractive growth opportunities in all three segments.’
The parties have identified the banking business as one main area for growth potential. In the structured property financing segment, additional capital available would allow Aareal Bank to broaden and diversify the volume of its portfolio. The investment agreement aims to increase the credit portfolio to up to €40 bn over the next five years approximately, depending on market conditions.
He added, ‘The consensus view amongst management and the financial investors is that the Banking & Digital Solutions segment harbours considerable potential for further capital-efficient growth in net commission income. The focus here shall be on the expansion and a wider international footprint of the core offering in payment services – through further M&A activities, and supported by the investors’ market access and attractive cooperation models, including with the investors’ portfolio companies and Aareon.’
The Value Creation Programme for Aareon – jointly developed with Advent as minority shareholder of the Aareon software subsidiary – is expected to be accelerated. It aims for significant earnings growth by 2025. With the new owners’ support, Aareon will be able to access additional funds to make acquisitions, thus accelerating its successful m&a roadmap even further.