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ADO Properties to acquire Adler Real Estate, make minority investment in Consus

Luxembourg-based ADO Properties SA agreed to acquire Germany's Adler Real Estate AG through a voluntary public takeover offer, aiming to form one of Europe's largest listed residential real estate companies with a portfolio value of roughly €8.6 billion.

ADO is offering 0.4164 of a new share for each Adler share, representing a premium of 17.33% to Adler's closing price as of Dec. 13.

Adler's boards support the transaction and recommended their shareholders to accept the offer. Shareholders in Adler representing a combined 52.21% signed irrevocable undertakings to tender their shares. The business combination is expected to be completed in the first quarter of 2020, subject to antitrust clearance.

Closing of the transaction is expected to trigger change-of-control rights under a €710.0 million bridge loan of Adler and bonds issued and other loans used by Adler and/or its subsidiaries. ADO entered into a €3.46 billion facility agreement with J.P. Morgan Securities PLC, J.P. Morgan AG and J.P. Morgan Europe Ltd. to refinance any bonds tendered and loans terminated by relevant creditors as a result of change of control.

ADO intends to launch an up to €500 million rights issue after completing the acquisition.

The merged entity will be named Adler Real Estate Group with operational headquarters in Berlin. The company will be led by Maximilian Rienecker and Thierry Beaudemoulin as co-CEOs and Sven-Christian Frank as COO. The seven-member ADO board will be expanded to 10 members comprising five independent members including the chairman, two executive directors and three nonexecutive directors.

ADO also agreed to acquire a 22.18% stake in German developer Consus Real Estate AG for ‎€9.72 per share as part of a strategic cooperation agreement, amounting to a total cash consideration of €294 million.

Together with the Consus shares already owned by Adler, ADO's total stake in Consus will be about 25%. ADO also has a call option to gain an additional 51% shareholding at an exchange ratio of 0.2390 of a share per Consus share.

Under the strategic cooperation agreement, Consus and ADO will work together on residential development projects, and Consus provided ADO with a right to allow it to match any offer from a third party on joint projects.

J.P. Morgan is the financial adviser to ADO and provided the required financing for the transaction. Kempen is also acting as financial adviser and White & Case is acting as legal adviser.

Deutsche Bank AG and UBS Europe SE are acting as financial advisers and Norton Rose Fulbright LLP are acting as legal advisers to Adler.