(Bloomberg) -- German residential landlord Vonovia SE said it’s prepared to offer sweeteners to minority shareholders of a subsidiary in exchange for tighter control, following a yearslong campaign by activist shareholder Elliott Investment Management LP.
Vonovia agreed to enter discussions to conclude a so-called domination and profit and loss transfer agreement involving its Deutsche Wohnen SE unit, according to a statement late on Wednesday. Under such a deal, minority investors of Deutsche Wohnen — including Elliott — could sell their shares in exchange for newly issued Vonovia stock and receive an annual compensation payment.
Usually in German domination agreements, this annual payout is set at 5%. The final details of offer are still to be determined, Vonovia said.
Deutsche Wohnen shares surged as much as 25% in early trading in Frankfurt. The stock was up 22% at €27.65 as of 9:56 CET.
To be sure: the deal hardly represents a huge success for minority shareholders. Paul Singer’s Elliott filed a stake of 3% in Deutsche Wohnen mid-2021, when the stock was trading at above €50, almost double today’s share price.
Still, the decision does at least offer Elliott a possible way out of its investment. In the past the fund manager refused offers by Vonovia to buy its Deutsche Wohnen holding. A spokesperson for Elliott declined to comment.
Last year, Elliott asked a Berlin court to order a special audit into Deutsche Wohnen over a large loan it made to Vonovia, arguing that the decision amounted to illicit financial assistance and was approved too quickly, Bloomberg reported at the time. Elliott said the money helped Vonovia repay some of the bridge loans that the real estate group took up to finance its multibillion-euro acquisition of Deutsche Wohnen in 2021.
Shareholders of both companies will vote in December on whether to implement the domination and profit and loss transfer agreement, according to Wednesday’s statement.
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