Bankers get red faces in German landlord M&A fail

The logo of German real estate company Vonovia is seen at a Vonovia building in Essen
The logo of German real estate company Vonovia SE, a member of the German DAX-30 stock market index is seen at a Vonovia building in Essen, western Germany May 10, 2016.

LONDON, July 23 (Reuters Breakingviews) - Here’s one for the M&A connoisseurs: German landlord Vonovia’s (VNAn.DE) 18 billion euro offer for Deutsche Wohnen (DWNG.DE) has probably failed, even though the target’s investors wanted it to succeed. Preliminary tender results released late on Friday showed that around 48% of shareholders accepted, just shy of a minimum 50% threshold.

It’s not that investors refused a lowball bid: Deutsche’s shares never traded more than a fraction above the 52-euros-per-share offer read more . Instead, the problem seems to be a communication breakdown between hedge funds which own one-third of Deutsche Wohnen’s equity and Vonovia, which was advised by Bank of America (BAC.N), Société Générale (SOGN.PA), Morgan Stanley (MS.N) and Perella Weinberg.

The hedge funds stood to gain if Vonovia landed somewhere between 50% and 100%: courtesy of German takeover laws they could eventually demand more money if Vonovia sought full control. But no one had a reason to tender more shares than were necessary to get it over the line. Bankers and shareholder-advisory groups usually coordinate the process if the vote looks close, according to two people involved in the deal. Somehow, that message seems to have been lost. (By Liam Proud)

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Editing by Peter Thal Larsen and Karen Kwok

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