Dispute about future course
Pressure on Aareal Bank management increases
2/6/2022 12:34 p.m
Aarel Bank recommends that its shareholders accept a takeover bid. But the billion dollar deal fails. Two major shareholders opposed it and are now demanding a change in personnel. For them, bankruptcy is a sign of distrust among shareholders.
After the failed takeover of Aareal Bank by financial investors, the management board of the real estate financier came under increasing pressure from hedge funds. The investment companies Advent and Centerbridge and the Canadian pension fund CPPIB admitted that their EUR 1.86 billion joint offer for Aareal Bank had failed. They missed the self-imposed threshold of 60 percent of the shares – and clearly, as an insider said: “It wasn’t close.”
Activist investors Petrus Advisers and Teleios, who together hold more than 20 percent of Wiesbadener Bank, celebrated this as a success in defending themselves against the offer, which they felt undervalued Aareal Bank. They sharply criticized the board around Jochen Klösges and called for the replacement of supervisory boards.
The rejection of the takeover is “proof of the shareholders’ distrust of a management team that unanimously let themselves be pulled over the cart for an unfair transaction,” said Aareal Bank’s largest shareholder, Petrus Advisers. The management board must now examine all options for the bank and its coveted software subsidiary Aareon. The time has come to create value for all shareholders – and not just for those interested in takeovers. “If Jochen Klösges and CFO Marc Hess are unable or unwilling to put in the hard work now needed, this is their last chance to step down and hand the bank over to other managers.”
Klösges defended himself: The investors’ offer was in the best interest of everyone involved. After the offer failed, Aareal shares fell nine percent to EUR 26.40 in late trading on Friday.
Petrus Advisers wants new controllers
The investors had recently offered 31 euros per share. It was clear that the takeover would be a nail-biter for her. In order to improve their chances, they had lowered the acceptance threshold and increased the offer by two euros – in vain. A second attempt is not planned, the insider emphasized.
Teleios explained: “The board of directors must better defend the company against such obvious opportunism in the future.” Petrus Advisers called for the resignation of Supervisory Board Chairman Hermann Wagner and Richard Peters, the representative of the Federal and State Pension Fund (VBL), who had supported the takeover. Petrus Advisers had already had three members of the Supervisory Board voted out at the Annual General Meeting in December, but narrowly failed with their own candidates.
Klösges wants to increase the stock market value of the bank with a growth course: “The group has considerable growth potential in all segments, which we want to use consistently in the coming years.” The loan portfolio should grow by ten percent to EUR 33 billion by the end of 2024 – “with correspondingly positive effects on net interest income”. CFO Marc Hess said the chances are currently good “to take very profitable new business on the books”.
Dividend payout?
As early as this year, the operating result should be close to the 248 million euros before the corona pandemic, and by 2024 there will be more than 300 million. In 2020, Aareal Bank, which is heavily involved in sectors such as hotels and shopping centers, made an operating loss of EUR 75 million. For 2021 she has announced a profit of 100 to 175 million euros.
The most valuable part of Aareal Bank is the software division Aareon, in which Advent has held a 30 percent stake since 2020. She should get more money for takeovers, as announced by former Commerzbank board member Klösges, who joined Aareal in June 2021. Petrus Advisers again called for Aareon to be split off in favor of the shareholders. The board doesn’t think that’s feasible. Apartment owners can use Aareon’s software to manage rents, for example. Many of them deposit billions of dollars in rent and deposits with the bank, giving them cheap refinancing. Without Aareon, this would not be the case.
Petrus demanded that the second tranche of the dividend for 2020 – EUR 1.10 per share – which had been postponed in autumn due to the takeover bid, be paid out immediately. The board announced this for the next general meeting on May 18th.