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VIPsight

Corporate Governance – portrayed in the individual cultural and legal framework, from the standpoint of equity capital.

VIPsight is a dynamic photo archive, sorted by nations and dates, by and for those interested in CG from all over the world.

VIPsight offers, every month:
transparent and independent current information / comments / facts and figures on corporate governance locally and internationally,

  • written by local CG experts,
  • selected and structured by the Club of Florence,
  • financed by its initiator VIP and other sponsors with a background of “Equity and Advisory” interests.
     

VIPsight International


Article Index

 

 

ACTIONS CORNER

 

Deutsche Wohnen SE / Vonovia SE: „Eigenbedarf“ in Berlin

Far-sightedness is a quality that cannot be blamed on politicians in Berlin. It is therefore not surprising that after German reunification the city parted with the burden of a large housing stock as quickly as possible. Today, properties that were hastily sold then are now contributing to the creation of Europe´s largest residential real estate group. This is due to the signing of the business combination agreement regarding the merger of Deutsche Wohnen SE and Vonovia SE in May 2021. The combination will result in a real estate group with a projected combined market capitalization of around 45 bn EUR and a combined real estate portfolio of approx. 90 bn EUR. The more than 500,000 apartments represent a Germany-wide market share of nearly 2 percent.

Vonovia expects to realize synergy effects and cost savings of approximately € 105 million per year via the transaction by the end of 2024. The business combination shall be rental EBITDA yield and NTA per share accretive, and the credit rating remains strong since S&P has confirmed Vonovia’s current rating of BBB+ and Moody’s has initiated coverage with a rating of A3.

On 23 June, Vonovia announced the launch of its voluntary public takeover offer for all shares in Deutsche Wohnen, offering € 52 in cash for each outstanding Deutsche Wohnen share. The offer period is expected to end on 21 July 2021. Vonovia’s offer represents a premium of 15.6% on the closing price of Deutsche Wohnen on 21 May 2021, the last day of trading before the offer was announced on 24 May 2021, and of 22.4% based on the volume-weighted average price of Deutsche Wohnen shares over the last three months up to 21 May 2021.

The industrial logic is obvious. Whether the desired benefits can be realized depends on the political climate, though. The hasty privatizations contributed to strong rent increases in Berlin. But as a side-effect of the merger, the city of Berlin can acquire 20,000 apartments for its own portfolio. No wonder local politicians are happy about this transaction.

 

Bayer AG: Stubbornness can be expensive

Gradually, the financial burden of the Monsanto acquisition is becoming visible to shareholders. A considerable part of this is due to the Roundup™ product group. You do not have to be an opponent of Monsanto to understand that. Here the numbers speak for themselves. And even today it is still not possible to predict how high the bill will be in the end. The main reason for this unfortunate situation is that despite all the efforts of the lawyers, Bayer has still not succeeded in reaching a workable agreement with the plaintiffs. Viewed from the perspective of the financial control room, this may come as a surprise. After all, there was a double-digit billion amount on the table.

Shouldn´t the money speak for itself? To resolve around 125,000 claims by Roundup™ users that tie the glyphosate-based product to non-Hodgkin lymphoma, Bayer offered to pay up to 9.6 bn USD, and to set aside additional 2.0 bn USD to be used towards future claims. Facebook users were flooded with adds in this respect and know this part of the story from the lawyer´s marketing departments. Effectively, this looked like a pure cash transaction. What is more, you can hand in the change for the transaction at the next store around the corner, because that's where Roundup™ still sits on the shelf, ready to be bought by retail customers.

So here´s the local view: According to Reuters, the District Judge Vincent Chhabria is said having stated: "Bayer is a massive wealthy company and it continues to make money off Roundup sales." Which is why he then refused to bless the deal that had already been negotiated.

 

Air Berlin PLC i.I. / Deutsche Börse AG: Brexit throws everything upside down

Little is known about some consequences of the Brexit. Air Berlin´s insolvency administrator recently added an interesting feature.

Let´s start with a legal effect of the Brexit. According to the insolvency administrator, the withdrawal of the United Kingdom from the EU meant, that the EU legal principle of freedom of establishment no longer applies to companies founded under English law, such as for example Air Berlin PLC. Therefore, the company will no longer be recognized as a foreign company in the form of an English public limited company due to it continued administrative seat in Germany but must be reclassified as a German civil law company (“BGB-Gesellschaft”).

The Deutsche Börse subsidiary Clearstream Banking AG is registered as a shareholder of Air Berlin PLC and holds these shares for investors who have acquired entitlements to Air Berlin PLC shares. In the opinion of the insolvency administrator, Clearstream Banking is now a personally liable partner of this company. Accordingly, Air Berlin informed in an ad hoc release that the insolvency administrator will file an initial lawsuit against Clearstream Banking AG at the Frankfurt am Main regional court for the payment of approx. 0.5 bn EUR. Also, the court is supposed to determine that Clearstream has more extensive liability.

Clearstream didn´t seem impressed with the news. However, the news has brought new potential to the Air Berlin shares, and that is always good news for a stock exchange.


 

K+S AG: The Time has come to optimize the Balance Sheet

In the past two years, investors in K+S went through a rollercoaster of emotions. High liabilities weighed on the balance sheet, which at the same time offered some potential for value adjustments. The relief was great when the sale of the Americas salt business consolidated in the Operating Unit Americas to Stone Canyon Industries Holdings LLC was completed in March this year.

The sale was an important milestone in the planned reduction of the debt burden, and its net proceeds of approx. 2.6bn EUR shall be entirely used for this purpose.  

Since then, it has been going fast. Immediately after the closing of the sale, K+S repaid financial liabilities of approx. 1 bn EUR and terminated the syndicated line of 350 million EUR agreed with KfW and other banks in August 2020 (which was initially granted to provide additional financial resources in the wake of the COVID pandemic).  In June, a public tender offer to buy back outstanding 2022, 2023 and 2024 bonds, which helped to reduce the financial liabilities by a further 560 million EUR.

It looks as if the conditions in Kassel became more pleasant in recent months.