March 28, 2019 | Media | Europe | Ended

Scout24 / Hellman & Friedman and Blackstone: The 50%+1, Bestellerprinzip Risk and Optionality

In the wake of news in summer 2018 that German lawmakers were proposing a significant regulatory reform to the domestic real estate market - the Bestellerprinzip - Scout24’s stock price collapsed by nearly 30%. This negative performance helped trigger renewed interest from private equity firms and the company was subsequently shopped to potential buyers. After some suitors dropped out and a bid was rejected, the company finally agreed to be taken private by a financial sponsor consortium consisting of Hellman & Friedman and Blackstone. These same sponsors formerly held 70% of Scout24 for two years before IPO’ing the company in October 2015. In this note, we explore why the sponsors are returning for a second run, the deal and timing implications of a potential Bestellerprinzip implementation on the German home sales market, and the potential outcomes given the 50% minimum acceptance condition. We analyse the strategies, trading and ownership developments of similar precedent deals over the past ten years, both during and after acceptance periods, and calculate Scout24’s break price in formulating our recommendations.

Contents 1. Strategic Rationale, LBO Analysis 2. The Sale Process and Other Potential Buyers 3. The Bestellerprinzip Risk: Background, Implications and Timing 4. The 50% Condition: Likelihood of Success and What’s Happened in the Past 5. Post-Tender Offer Completion: Potential Trading Risks 6. Scout24 Break Price Analysis 7. Risk Arbitrage Trading Considerations and Timing 8. Deal Structure (52 pages)

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