Takeover undermined by index and hedge fund manipulation
In a significant development, the proposed merger between German real estate giants Vonovia and Deutsche Wohnen is facing obstacles, primarily due to the influence of index funds and hedge funds. These institutional investors, with their large stakes and significant influence on corporate decisions, are expressing concerns about transaction terms and valuation.
These funds are impacting the transaction's execution in several ways. They can exercise their shareholder voting power, potentially voting against the merger proposal or demanding additional negotiations. Their involvement often leads to more rigorous due diligence and legal challenges. Moreover, their opposition can highlight competitive concerns or shareholder rights issues that regulators must consider.
The search results do not provide explicit detail on these investors' opposition to the Vonovia-Deutsche Wohnen merger, but it is common in large real estate mergers that index funds and hedge funds oppose deals if they believe share values or transaction structures are unfavorable. Vonovia's management has highlighted integration benefits and growth opportunities with Deutsche Wohnen, but they have also acknowledged the complexities in executing such a large-scale merger.
The size of the merger offer, €27.8 billion, gives these large shareholders considerable power. For instance, around 1.4 percent of the DAX ETF volume is invested in Deutsche Wohnen shares, amounting to around 207 million euros. However, Vonovia has not yet reached the intended minimum acceptance threshold of 50 percent of Deutsche Wohnen's shares. They have only managed to secure 47.6 percent, which was not enough.
Vonovia initially offered 52 euros for each share of Deutsche Wohnen, but hedge funds speculated that Vonovia would improve its offer. This speculation caused problems, as it led to an increase in the Deutsche Wohnen share price, making the original offer less attractive. However, index funds are not allowed to offer their portfolio shares for sale until the transaction is certain to take place.
The likelihood of Vonovia making another attempt in the near future is uncertain. The Deutsche Wohnen share was trading at around 45 euros when Vonovia made its offer, but if the price remains high, it could deter another attempt. Furthermore, Deutsche Wohnen will only be removed from stock indices and the sale will be possible if it goes to Vonovia.
In summary, index funds and hedge funds are influencing the merger by voting and negotiating terms for shareholder value protection. This can delay or complicate the transaction's timely execution. Their role is critical given their large holdings in both companies and their focus on maximizing investment returns. The increasing share of passive investors, like index funds and hedge funds, is making transactions like this more difficult, according to Vonovia CEO Rolf Buch.
Other investors, such as index funds and hedge funds, are exerting their influence on the merger between Vonovia and Deutsche Wohnen, using their shareholder voting power to potentially vote against the merger proposal or demand further negotiations. The focus of these investors is on protecting shareholder value, a critical factor given their large holdings in both companies and their emphasis on maximizing investment returns.
