January 14, 2020 | Real Estate | Europe | Ended

TLG / Aroundtown: Back-Ends in All-Stock, No Minimum Acceptance, Real Estate Deals

Despite some recent deal tender failures in Germany in 2019 - from Scout24 to Osram to Metro - event driven funds still actively seek opportunities in German back-end situations, led by the speculation for future domination agreements. The takeover of TLG by Aroundtown is different from others whereby it is a real estate deal, with all-stock consideration and is not subject to a minimum acceptance requirement. Thus, while there is no risk to the tender outcome or antitrust (German FCO approval has been achieved), notable considerations are whether Aroundtown will pursue a post-deal control measure, such as a domination agreement or squeeze-out, and how a standalone TLG will perform immediately after the transaction closes. In this report, we assess TLG back-end considerations after analysing relevant precedent German takeover offers (real estate, stock component and “no minimum acceptance” deals), specifically dissecting the transactions’ ultimate acceptance levels, in-deal control commentary, timing and control measure actions, and the immediate and medium-term share price performances of untendered target shares.

Contents 1. Strategic Rationale for TLG Shareholders to Tender 2. Aroundtown’s TLG Shareholding Post-Additional Acceptance 3. Control Measure Intentions and Domination Agreement Commentary 4. Timing of any Back-End Strategy for Untendering Minorities 5. Immediate Back-End Target Returns of Precedent Transactions 6. Calculations of a Standalone TLG 7. Event Driven Trading Considerations Appendices A. Deal Structure B. Majority Shareholder Rights and Squeeze-Out Snapshots (33 pages)

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