SHAREHOLDERS IN troubled property lender Hypo Real Estate (HRE) have been given until May 4th to consider a German government takeover offer worth €321 million.
Announcing the bid yesterday, Germany’s bank stabilisation fund (Soffin) said a swift state takeover was in “everybody’s interests”.
“This is the only way of stabilising of the HRE group and, at the end of the day, the finance markets, in a manner that is legally sound, sustainable, cost efficient and swift,” said Hannes Rehm, spokesman for Soffin.
If shareholders reject the bid, Berlin can take control of HRE through new expropriation legislation.
The offer represents a 10 per cent premium per share – or €28 million in total – on the statutory minimum offer price of €1.26.
The Munich-based group has been given €102 billion loans and guarantees after experiencing severe liquidity problems attributed to its Dublin-based subsidiary, Depfa.
German officials declined to discuss the future within a state-owned HRE group of Depfa, bought for €5.7 billion in 2007. The takeover is seen as the only way of guaranteeing the state’s investment to date.
Analysts say the chances are good that the Dublin bank will survive under state control, but only if it goes back to its financial roots.
“The initial rescue has succeeded and, long-term, Depfa has good chances if it returns to its original conservative profile of financing public projects through Pfandbrief covered bonds,” said Manfred Jakob, analyst with SEB bank in Frankfurt.
Depfa’s core business is lending money to governments and local authorities for capital projects like road construction and bridge-building. It was caught out when the Lehmann Brothers collapse in September froze the short-term money markets through which it refinanced its loans.
With a 10 per cent stake Germany’s “Pfandbrief” market, worth about €88 billion, Berlin views Depfa/HRE as a too-big-to-fail bank “structurally relevant” for the German economy.
The Soffin bank stabilisation fund warned yesterday of “substantial and barely predictable con-sequences” if the bank collapsed.
Last month, the federal government acquired an 8.7 per cent share in the bank. A full takeover would allow it to push for a capital increase, diluting the stakes of existing shareholders.
The largest HRE shareholder, a US consortium led by investor Christopher Flowers, has said it will study the documents but retains a “preference” to retain its 24 per cent stake, for which it paid €22.50 a share last year.
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