CTP will enter the logistics real estate market in Germany with a circa €800 million public takeover and delisting offer for Deutsche Industrie REIT-AG, in line with CTP’s communicated growth strategy.
Remon Vos, Founder and CEO of CTP, said: “CTP is quickly delivering on the pan-European active growth strategy we outlined during our IPO earlier this year. Through our proposed acquisition of Deutsche Industrie REIT-AG, we create a meaningful entry into the German logistics and industrial real estate market. We are buying a portfolio of scale, below replacement value, where we believe we can increase rental values, improve operating margin, and realise redevelopment potential. CTP will leverage DIR’s proven track record in acquiring and sourcing industrial and logistics assets across Germany and combine this with our proven development capabilities. Combining DIR’s and our portfolio and tenant bases are expected to result in synergies that make for a compelling deal and immediately add to CTP’s EPRA earnings per share.”
CTP intends to acquire full ownership of and integrate DIR into its business. Both companies today have signed a Business Combination Agreement (“BCA”) to this end. Upon combination of the businesses of the two companies, CTP is expected to have a combined portfolio value of approximately €7.2 billion.
CTP’s one-tier board of directors has resolved that, in accordance with the BCA, CTP will submit a voluntary public takeover and delisting offer (the “Offer”) to acquire all outstanding shares of DIR (the “DIR Shares”). As consideration, CTP is offering 1.25 new shares of CTP (“CTP Shares”) for each validly tendered DIR Share (the “Share Consideration”). In order to meet the statutory requirements for a delisting of the DIR Shares, CTP will also offer a cash consideration at €17.12 per DIR Share3 (the “Cash Consideration”).
Based on the XETRA closing price (Frankfurt Stock Exchange) for the DIR Shares and the Euronext Amsterdam closing price for the CTP Shares, each as of 25 October 2021, the implied price of the Share Consideration per DIR Share amounts to €24.94, representing a premium of:
o 48.0% to DIR‘s last closing price;
o 45.7% to DIR’s 3-months volume-weighted average price; and
o 66.7% to DIR’s EPRA NTA per 30 June 2021.
DIR’s management board and supervisory board fully support the Offer and will recommend their shareholders to accept the Offer for the Share Consideration, subject to review of the offer document to be published by CTP.
Shareholders in DIR representing more than 56 percent of its share capital and voting rights, including DIR Shares held directly and indirectly by its CEO Rolf Elgeti, have committed their formal support for the Offer and, in particular, circa 44 percent for acceptance of the Share Consideration.
Strategic step to acquire a yielding portfolio in strong locations across Germany
CTP aims to strengthen its position as the largest listed continental European logistics real estate company through the acquisition of DIR. The expansion into Germany is in line with the growth strategy communicated by the Company during its IPO in March 2021. The Company plans to maintain its focus on growth through the development of high-quality logistics assets, for which the acquisition of DIR presents a catalyst into Europe’s strongest economy.
DIR adds nearly €800 million of yielding assets to CTP’s portfolio of owned assets of €6.4 billion. The portfolio consists of 89 assets located in strong economic zones in Germany, including the Rhine-Ruhr, the Munich-Stuttgart, the Hannover-Berlin, and the Northern harbour areas. With 665 tenants in 81 municipalities, DIR offers a Germany-wide network of expansion possibilities, that CTP intends to unlock with its proven development and asset management capabilities. CTP’s management has visited 86 of the properties and has already developed business plans for each.
The business combination is expected to create a strong and active player in the European logistics and light industrial real estate market with the potential and ambition to grow sustainably and enhance the sustainable and long-term success of its business while acting in the best interest of its shareholders, customers, employees, and other stakeholders that will be amplified by CTP’s cross-border ambition and development and asset management expertise.
CTP shareholders benefit from immediate EPRA EPS accretion from DIR’s yielding portfolio, which is acquired at an implied gross initial yield of 5.1 percent, including real estate transfer taxes. Also, CTP can use its shares (which benefit from their liquidity) as transaction currency, thereby increasing EPRA NTA per share as well as enhancing the future free float and further liquidity of its shares.
Following successful completion of the transaction, CTP expects to realise synergies, increasing pre-tax EPRA earnings in an amount of around EUR 7 million per year, primarily driven by CTP’s lower cost of debt. Both companies strongly believe, however, that the merit of the business combination is primarily in the potential to create value together in Germany more than in cutting operational costs.
Transaction structure presents a clear path to full ownership and integration of DIR
The Offer will not be subject to any closing conditions, offering instant deal certainty to DIR shareholders, and is intended to be followed by a cross-border legal merger to obtain full ownership of DIR and integrate the company fully into CTP’s business (the “Merger”).
The acceptance of the Offer for the Share Consideration gives DIR shareholders the opportunity to become a shareholder in a larger, more diversified and more liquid company. Simultaneously, tendering DIR shareholders will continue to benefit from the combined future upside of CTP and DIR, while being offered a high premium to DIR’s share price.
The Offer is supported by more than 56 percent of DIR shareholders through various agreements, including circa 44 percent of the shareholders that have irrevocably undertaken to tender their DIR Shares into the Offer for the Share Consideration. CTP and DIR have agreed in the BCA that DIR shall apply for delisting from the Berlin and Frankfurt Stock Exchanges before the end of the additional acceptance period of the Offer (the “Delisting”), subject to elimination of the REIT-status of DIR by resolution of a shareholders’ meeting. Any shareholders that decide not to tender their DIR Shares into the Offer may hence experience a severe decrease in the liquidity of their shares after the Delisting.
Following the Offer, CTP and DIR have agreed to seek shareholder approval for CTP to obtain 100 percent of the DIR Shares by way of effecting the Merger and to subsequently integrate DIR in CTP. As a result of the Merger, DIR would cease to exist and shareholders that held DIR Shares not yet owned by CTP would be awarded CTP Shares at the same exchange ratio as awarded as Share Consideration, subject to applicable law.
The transaction is expected to result in DIR losing its status as a Real Estate Investment Trust and to result in real estate transfer tax becoming payable at the time of the Merger at an estimated amount of €43 million.
The business combination is intended to be concluded in the first half of 2022, subject to the successful completion of the Merger.