By James Wilson in Frankfurt
Germany’s government on Thursday launched its first takeover offer for a bank stricken by the financial crisis, saying it wanted to acquire all of Hypo Real Estate through an offer to shareholders.
Shareholders in the property lender are being offered E1.39 a share in the voluntary public takeover offer. The offer represents a 10 per cent premium over the legal minimum, which was confirmed on Thursday when an urgently written bank rescue law came into force.
The law ultimately gives the government powers to expropriate shareholders to take control of banks, and by making the takeover offer Berlin wants to show it has taken all steps at its disposal before it moves – as it expects to have to – to expropriate any holdout investors in HRE. The government insists it wants 100 per cent control of the lender to restructure it free from obstacles and with lower funding costs.
The offer, being made through Soffin, the government’s bank bailout agency, means Berlin will offer E290m for the shares in HRE it does not already own. Last month it agreed to take an initial 8.7 per cent stake through an issue of new shares.
“With its public offer and the chosen offer premium Soffiin underlines that it wishes to stabilise the financial market using a market-oriented approach if possible and by adhering to existing market practice”, said Hannes Rehm, chairman of Soffin’s management committee.
Soffin said the offer “provides an opportunity for HRE shareholders to sell their investment at an attractive price”. No minimum acceptance level is being set.
Analysts said the offer was pitched to try to persuade as many small shareholders as possible to sell. HRE shares closed on Wednesday at E1.20, compared with the E22.50 paid almost a year ago when JC Flowers, the private equity firm, led a tender offer for up to 25 per cent of HRE.
JC Flowers, which remains the largest investor in HRE, said it would study the government’s offer. It has previously suggested the government should invest in HRE at a price of E3 per share and says it wants to remain a shareholder.
Soffin said it intended to complete the offer quickly. “If HRE were to become insolvent, this would have substantial, barely quantifiable consequences for the national and international financial markets. This in turn would have a considerable impact on the entire national economy,” it said.
”Against this background, Soffin is intending to stabilise HRE through recapitalisation measures and the granting of guarantees.” The offer is still likely to take several weeks, allowing time for further government measures to try to take control of HRE at a shareholder meeting. Expropriation has to be set in motion by the end of June, according to the law.
HRE’s capital would be below the regulatory minimum without government support. It has already had E102bn of liquidity guarantees to enable to it to get short-term funding for Depfa, its public sector finance subsidiary. The bank lost E5.5bn in 2008.