Statement of the Board of Directors pursuant to section 27

THIS DOCUMENT IS A NON-BINDING TRANSLATION OF A GERMAN
REASONED STATEMENT PURSUANT TO THE GERMAN SECURITIES
ACQUSITION AND TAKEOVER ACT (WPÜG). IN CASE OF ANY
DISCREPANCY BETWEEN THE ENGLISH AND THE GERMAN VERSION,
THE GERMAN VERSION PREVAILS.
Mandatory publication in accordance with sections 27 para. 3 sentence 1, 14 para. 3
sentence 1 of the German Securities Acquisition and Takeover Act
(Wertpapiererwerbs- und Übernahmegesetz) (WpÜG)
REASONED STATEMENT
OF THE BOARD OF DIRECTORS OF
Gagfah S.A.
2 – 4, Rue Beck, L – 1222 Luxembourg,
Grand Duchy of Luxembourg, RCS Luxembourg B109.526
in accordance with section 27 para. 1 of the German Securities Acquisition and
Takeover Act
on the
voluntary public takeover offer (combined cash and exchange offer)
by
Deutsche Annington Immobilien SE
Münsterstraße 248, 40470 Düsseldorf
Germany
to the shareholders of
Gagfah S.A.
to acquire all shares in this company
_____________________________________________________________________
“GAGFAH Shares”: ISIN LU0269583422
“Tendered GAGFAH Shares”: ISIN LU1152862774
“Deutsche Annington Immobilien SE Offer Shares”: ISIN DE000A1ML7J1
Fractional Deutsche Annington Immobilien SE Offer Shares: ISIN DE000A13SUT8
_____________________________________________________________________
Table of Contents
I.
II.
III.
GENERAL INFORMATION ABOUT THE STATEMENT ....................6
1.
LEGAL BASIS OF THE STATEMENT ...................................................6
2.
FACTUAL BASIS OF THE STATEMENT ...............................................7
3.
STATEMENT OF THE GROUP WORKS COUNCIL ................................7
4.
INDEPENDENT REVIEW AND DECISION BY GAGFAH
SHAREHOLDERS .............................................................................7
5.
PUBLICATION OF THE STATEMENT ..................................................8
INFORMATION ABOUT THE TARGET COMPANY ...........................9
1.
BASIC INFORMATION......................................................................9
2.
AUTHORISED CAPITAL 2011 ...........................................................9
3.
2014 CONVERTIBLE BONDS .........................................................10
4.
STOCK GRANTS TO SENIOR MANAGEMENT AND BOARD OF
DIRECTORS ..................................................................................10
5.
SHAREHOLDER STRUCTURE ..........................................................11
6.
COMPOSITION OF THE BOARD OF DIRECTORS AND THE
MANAGEMENT OF GAGFAH HOLDING GMBH.............................. 11
7.
OVERVIEW OF THE BUSINESS OF THE GAGFAH GROUP ................12
8.
SUMMARY OF FINANCIAL INFORMATION AND OTHER
COMPANY INFORMATION .............................................................. 13
INFORMATION ABOUT THE BIDDER ..............................................17
1.
BASIC INFORMATION.................................................................... 17
2.
CAPITAL STRUCTURE ...................................................................17
3.
SHAREHOLDER STRUCTURE ..........................................................18
4.
COMPOSITION OF THE MANAGEMENT BOARD AND THE
SUPERVISORY BOARD ................................................................... 19
5.
BUSINESS OF DA .........................................................................19
6.
GAGFAH SHARES HELD BY THE BIDDER, PERSONS ACTING
IN CONCERT WITH THE BIDDER AND THEIR SUBSIDIARIES............... 20
7.
DISCLOSURES CONCERNING SECURITIES TRANSACTIONS................ 20
IV.
BACKGROUND OF THE OFFER – BUSINESS
COMBINATION AGREEMENT DATED 1 DECEMBER 2014 ........... 20
V.
INFORMATION ABOUT THE OFFER ................................................21
1.
RELEVANCE OF THE OFFER DOCUMENT ........................................21
2.
IMPLEMENTATION OF THE OFFER.................................................. 22
Page 2
VI.
VII.
3.
CONSIDERATION ..........................................................................22
4.
ACCEPTANCE PERIOD AND ADDITIONAL ACCEPTANCE
PERIOD ........................................................................................22
5.
CREATION OF THE DA OFFER SHARES AND
IMPLEMENTATION OF THE EXCHANGE ........................................... 24
6.
AGREEMENT IN THE EVENT THAT MORE THAN 90% OF THE
RESPECTIVE OUTSTANDING GAGFAH SHARES ARE
TENDERED ................................................................................... 27
7.
SELL-OUT RIGHT OF THE GAGFAH SHAREHOLDERS; OFFER
CAPITAL INCREASE II................................................................... 28
8.
POSITION OF THE BONDHOLDERS OF THE 2014 CONVERTIBLE
BONDS ........................................................................................30
9.
CLOSING CONDITIONS.................................................................. 32
10.
WAIVER OF CLOSING CONDITIONS ...............................................36
11.
TRADING IN TENDERED GAGFAH SHARES ..................................36
12.
STATUS OF REGULATORY APPROVALS AND PROCEEDINGS.............. 37
13.
CLOSING...................................................................................... 37
14.
APPLICABLE LAW......................................................................... 37
15.
PUBLICATIONS .............................................................................38
FINANCING OF THE OFFER ..............................................................38
1.
DELIVERY OBLIGATION (SHARE COMPONENT); FINANCING
OF THE CASH CONTRIBUTIONS AND THE CASH COMPONENT
FOR EXCESS SHARES .................................................................... 38
2.
TOTAL TRANSACTION COSTS .......................................................39
TYPE AND AMOUNT OF THE CONSIDERATION OFFERED .........39
1.
TYPE AND AMOUNT OF THE CONSIDERATION OFFERED................... 39
1.1
Statutory requirements regarding the type of
consideration ...................................................................40
1.2
Statutory requirements as to the amount of the
consideration ...................................................................42
2.
OWN ASSESSMENT BY THE BOARD OF DIRECTORS OF THE
ADEQUATENESS OF THE CONSIDERATION ...................................... 44
2.1
2.2
2.3
2.4
2.5
Premiums compared to historic stock exchange
prices ............................................................................... 44
Premiums as compared to price targets of stock
analysts ...........................................................................45
Premiums compared to the EPRA NAV as per 30
September 2014 ...............................................................46
Consideration of GAGFAH’s growth potential ................46
Adequateness of the valuation of the Existing DA
Shares on the basis of stock exchange prices....................47
Page 3
2.6
2.7
VIII.
IX.
X.
Fairness Opinions ............................................................47
Overall assessment ..........................................................49
OBJECTIVES AND INTENTIONS OF THE BIDDER AND
PROSPECTIVE CONSEQUENCES FOR GAGFAH ............................49
1.
THE OBJECTIVES AND INTENTIONS ACCORDING TO THE
BUSINESS COMBINATION AGREEMENT .........................................49
1.1
Name; registered office; future strategy and
structure ..........................................................................50
1.2
Board composition at DA and GAGFAH .........................50
1.3
Management of essential subsidiaries; distribution
and acquisition ................................................................51
1.4
Employees ....................................................................... 52
1.5
Integration .......................................................................53
1.6
Implementation ...............................................................53
2.
OBJECTIVES AND INTENTIONS IN THE OFFER DOCUMENT ..............54
2.1
Economic and strategic background; potential
synergies from the Bidder’s point of view........................54
2.2
Intentions of the Bidder regarding the future
business activities of the Target and the Bidder................ 56
3.
ASSESSMENT OF THE OBJECTIVES AND INTENTIONS OF THE
BIDDER AND THE PROSPECTIVE CONSEQUENCES............................ 57
3.1
Economic reasons and strategy; synergy potentials ..........57
3.2
Future business operations of GAGFAH and the
Bidder; use of assets and future obligations of
GAGFAH and the Bidder ................................................ 59
3.3
Name and registered office of the Target and the
Bidder; location of major parts of the business .................59
3.4
Composition of boards.....................................................60
3.5
Merger of GAGFAH into DA ..........................................60
3.6
Financial consequences for GAGFAH .............................60
3.7
Consequences on existing business relationships of
the GAGFAH Group .......................................................62
4.
POSSIBLE CONSEQUENCES FOR EMPLOYEES AND EMPLOYEE
REPRESENTATION IN THE GAGFAH GROUP AS WELL AS
EMPLOYMENT CONDITIONS........................................................... 62
CONSEQUENCES FOR GAGFAH SHAREHOLDERS........................63
1.
POTENTIAL DISADVANTAGES IN CASE THE OFFER IS
ACCEPTED.................................................................................... 64
2.
POTENTIAL DISADVANTAGES IN CASE THE OFFER IS NOT
ACCEPTED.................................................................................... 66
INTERESTS OF THE MEMBERS OF THE BOARD OF
DIRECTORS OF GAGFAH AND OTHER BOARD MEMBERS
OF THE GAGFAH GROUP ..................................................................69
Page 4
1.
PROVISIONS UNDER THE BUSINESS COMBINATION
AGREEMENT ................................................................................69
2.
TERMINATION RIGHTS OF THE MEMBERS OF THE SENIOR
MANAGEMENT IN CASE OF CHANGE OF CONTROL .......................... 70
XI.
INTENTIONS OF THE MEMBERS OF THE BOARD OF
DIRECTORS AND THE MANAGING DIRECTORS
(GESCHÄFTSFÜHRER) OF GAGFAH HOLDING GMBH TO
ACCEPT THE OFFER........................................................................... 71
XII.
RECOMMENDATION ..........................................................................71
APPENDIX 1 – GROUP WORKS COUNCIL STATEMENT
APPENDIX 2 – GAGFAH SUBSIDIARIES
APPENDIX 3 – FAIRNESS OPINION BANK OF AMERICA MERRILL LYNCH
APPENDIX 4 – FAIRNESS OPINION DEUTSCHE BANK
APPENDIX 5 – FAIRNESS OPINION ROTHSCHILD
Page 5
On 19 December 2014, Deutsche Annington Immobilien SE with registered office in
Düsseldorf (DA or the Bidder; together with its subsidiaries and affiliated companies
the DA Group) published in accordance with section 14 paras. 2 and 3 of the German
Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz)
(WpÜG) an offer document within the meaning of section 11 WpÜG (the Offer
Document) for its voluntary public takeover offer (the Offer) to the shareholders of
Gagfah S.A. with registered office in Luxembourg (GAGFAH or Target Company;
together with its subsidiaries and affiliated companies the GAGFAH Group) to
acquire all shares in GAGFAH (ISIN LU0269583422) (GAGFAH Shares and each a
GAGFAH Share) against payment of a cash amount of EUR 122.52 (the Cash
Component) and the granting of five no-par value registered shares of DA (the Share
Component; the shares in DA offered in exchange hereinafter the DA Offer Shares)
per fourteen GAGFAH Shares tendered for acceptance (GAGFAH Shares for which
the Offer is accepted within the Acceptance Period (as defined below) or the
Additional Acceptance Period (as defined below) are hereinafter referred to as the
Tendered GAGFAH Shares).
The Offer Document was submitted by the Bidder to the board of directors of
GAGFAH (the Board of Directors) on 19 December 2014 and on the same date
forwarded by the Board of Directors to the group works council of the German
subsidiaries of GAGFAH. Furthermore, the Offer Document was forwarded by the
Board of Directors to the employees directly employed at GAGFAH on 19 December
2014. In accordance with Art. 6 para. 5 of the Luxembourg Takeover Law (as defined
below), the Board of Directors consulted these employees and gave them the
opportunity to express their opinion on this Statement vis-à-vis the Board of
Directors.
The Board of Directors has carefully examined the Offer and issues the following
reasoned statement (the Statement) in accordance with section 27 para. 1 WpÜG
thereon, which was approved by the Board of Directors in his meeting of 22
December 2014.
I.
General information about the Statement
1.
Legal basis of the Statement
Pursuant to section 27 para. 1 sentence 1 WpÜG, the management board and the
supervisory board must issue a reasoned statement on an offer and any amendments
thereto. The present case is peculiar insofar as GAGFAH is a stock corporation
(société anonyme) under Luxembourg law but its shares are exclusively traded on
stock exchanges in the Federal Republic of Germany. In this situation, pursuant to
section 1 paras. 3 and 4 WpÜG in conjunction with section 2 of the German
Regulation on the Applicability of Provisions governing Offers within the meaning of
section 1 paras. 2 and 3 WpÜG (Verordnung über die Anwendbarkeit von
Vorschriften betreffend Angebote im Sinne des § 1 Abs. 2 und 3 des
Wertpapiererwerbs- und Übernahmegesetzes) (WpÜG Applicability Regulation), the
statement of the Board of Directors must be issued pursuant to section 27 WpÜG.
Since GAGFAH as stock corporation under Luxembourg law has only a Board of
Directors and no management board and supervisory board like a stock corporation
Page 6
under German law, this Statement is issued accordingly by only the Board of
Directors of GAGFAH.
Therefore, this Statement is issued in accordance with the laws of the Federal
Republic of Germany and certain applicable exemption rules under the law of the
United States of America. Furthermore, matters regarding the information of
employees of GAGFAH who are employed in Luxembourg are subject to
Luxembourg law, in particular the Luxembourg Law of 19 May 2006 on public
takeover bids (Loi du 19 mai 2006 portant transposition de la directive 2004/25/CE
du Parlement européen et du Conseil du 21 avril 2004 concernant les offres publiques
d’acquisition, Luxembourg Takeover Law).
2.
Factual basis of the Statement
All information, expectations, forecasts, assessments, forward-looking statements and
declarations of intent in this Statement are based on information available to the
Board of Directors at the time of publication of this Statement and reflect its
assessments and intentions at that time, which may change after the date of
publication of this Statement. The Board of Directors will update this Statement only
to the extent that it is obliged to do so under applicable law.
Unless expressly stated otherwise, the information about the Bidder, the persons
acting in concert with the Bidder and, in particular, the information on the intentions
of the Bidder are exclusively based on the information contained in the Offer
Document and other publicly available information. The Board of Directors is not
able to verify such information. To the extent that any information in this Statement
makes reference to, cites, or repeats the Offer Document, such information is a mere
reference by which the Board of Directors neither approves the Offer Document nor
assumes any liability for the correctness or completeness of the Offer Document.
The Board of Directors is also not able to verify the intentions stated by the Bidder in
the Offer Document, nor can it influence the implementation of such intentions. The
Board of Directors points out that the intentions of the Bidder may change at a later
point in time.
3.
Statement of the Group Works Council
The group works council of the German subsidiaries of GAGFAH has submitted to
the Board of Directors a statement on the Offer, which the Board of Directors must,
without prejudice to its obligations pursuant to section 27 para. 3 WpÜG, attach to its
Statement in accordance with section 27 para. 2 WpÜG. The statement of the Group
Works Council is attached as Appendix 1 to this Statement.
4.
Independent review and decision by GAGFAH shareholders
The Board of Directors points out that its statements and assessments in this
Statement are not binding on the shareholders of GAGFAH and do not purport to be
complete. Rather, the shareholders of GAGFAH must make their own decision on the
acceptance or non-acceptance of the Offer on the basis of the Offer Document and all
Page 7
other sources of information available to them (including any individual advice
obtained by them) and taking into account their individual tax and other situation. The
shareholders of GAGFAH should, in particular, carefully read the Offer Document
because it contains information that is important for them.
Each shareholder of GAGFAH is responsible for making his own decision on whether
or not, and in respect of how many GAGFAH Shares, if any, such shareholder will
accept the Offer, taking into consideration the overall circumstances, his individual
situation (including his personal tax situation) and his personal assessment of the
potential future development of the value and market price of the GAGFAH Share.
The Board of Directors does not assume any liability in the event that an acceptance
or non-acceptance of the Offer subsequently proves to be economically
disadvantageous.
In Section 1.6 of the Offer Document, the Bidder points out that the acceptance of the
Offer outside of the Federal Republic of Germany may be subject to legal restrictions.
In particular, the DA Offer Shares are not registered in accordance with the provisions
of the United States Securities Act of 1933 as amended (Securities Act). The DA
Offer Shares may therefore be neither offered nor sold to GAGFAH shareholders with
residence, registered office or normal place of business in the United States of
America (U.S. Shareholders), as well as agents, trustees, custodians or any other
persons acting on behalf of a U.S. Shareholder, unless the Bidder believes that there is
an exemption from the registration obligation pursuant to the Securities Act (e.g.
securities may, in particular, be offered to qualified institutional buyers, as defined in
Rule 144A of the Securities Act) or that the transaction does not fall within the scope
of the registration obligation pursuant to the Securities Act. If it is the opinion of the
Bidder that the DA Offer Shares may be neither offered nor transferred to a U.S.
Shareholder or any agents, trustees, custodians or persons otherwise acting on behalf
of a U.S. Shareholder pursuant to the provisions of the Securities Act, the relevant
U.S. Shareholder, which validly accepts the Offer, will receive, in lieu of the number
of DA Offer Shares to which he is entitled, a corresponding amount in cash (Euro)
from the sale of the respective number of DA Offer Shares. For this purpose, the
Settlement Agent (as defined below) will sell any DA Offer Shares to which the
respective U.S. Shareholders are entitled on behalf of the respective U.S. Shareholders
on the Frankfurt Stock Exchange at the respective market price and credit the
accounts of the entitled U.S. Shareholders with the proceeds resulting from these sales
without undue delay. The Bidder gives no guarantee that a specific price will be
realised through the sale via the Frankfurt Stock Exchange. The Board of Directors
believes on the basis of the information available to it that this approach with regard
to U.S. Shareholders is reasonable.
5.
Publication of the Statement
This Statement and any supplements and/or additional statements on possible
amendments to the Offer will be published in accordance with section 27 para. 3
sentence 1 and section 14 para. 3 sentence 1 WpÜG in the German language on the
internet on GAGFAH's website at http://www.gagfah.com under Investor Relations.
Copies of the statements will be available for distribution free of charge at GAGFAH
Page 8
GmbH, Prinzeß-Luise-Straße 33, 45479 Mülheim a. d. Ruhr, Germany (telephone:
+49 (0) 201 – 1751-221; fax: +49 (0) 201 – 175149-1751-217). The fact of
publication and availability of copies for distribution free of charge will be announced
in the Federal Gazette (Bundesanzeiger).
This Statement is published exclusively in the German language in accordance with
legal requirements and is the only authoritative version. In addition to the Germanlanguage Statement, an English translation will soon be published, and no liability is
assumed for the correctness of such translation.
II.
Information about the Target Company
1.
Basic information
GAGFAH is a stock corporation (société anonyme) incorporated under the laws of the
Grand Duchy of Luxembourg, qualifying as a securitisation company (société
anonyme de titrisation) under the Luxembourg Securitisation Law (loi de titrisation)
of 22 March 2004 with registered office in Luxembourg and business address 2 – 4
Rue Beck, L-1222 Luxembourg, Grand Duchy of Luxembourg, registered with the
Luxembourg register of commerce and companies (Registre de Commerce et des
Sociétés) under B109526. GAGFAH is the parent company of the GAGFAH Group.
The share capital of GAGFAH as of 23 December 2014 amounts to
EUR 269,940,693.75 represented by 215,952,555 registered shares with a nominal
value of EUR 1.25 each.
A list of all subsidiaries of GAGFAH is attached as Appendix 2 to this Statement.
Pursuant to section 2 para. 5 sentence 3 WpÜG, to the extent that the WpÜG is
applicable, and pursuant to Art. 2 para. 1, lit. d), Art. 2 para. 2 of the Luxembourg
Takeover Law, to the extent Luxembourg law is applicable, these subsidiaries are
deemed to be persons acting in concert with GAGFAH and with each other.
The GAGFAH Shares are admitted to stock exchange trading on the Regulated
Market (Regulierter Markt) of the Frankfurt Stock Exchange with simultaneous
admission to the sub-segment of the Regulated Market with additional post-admission
obligations (Prime Standard). The GAGFAH Share is currently included in the
MDAX, the FTSE EPRA/NAREIT Global Real Estate Index and the TR/GPR Global
100 Index EUR.
GAGFAH may repurchase treasury shares within the statutory limits. As of
23 December 2014, GAGFAH holds 459,057 treasury shares.
2.
Authorised Capital 2011
Pursuant to Art. 5 of the articles of association of GAGFAH, the Board of Directors or
the delegate(s) duly appointed by the Board of Directors are authorised to increase,
from time to time, the share capital by issuing up to 7,990,500,000 new shares to up to
EUR 9,988,125,000 (Authorised Capital 2011). The authorised and un-issued share
Page 9
capital and the relevant authorisation to issue shares on this basis are valid during the
period from 21 April 2011 until 14 July 2016.
The date and conditions of the issuance of new shares using the Authorised Capital
2011 are determined by the Board of Directors at its discretion. In particular, without
limitation, the Board of Directors may issue shares in favour of directors, executives,
consultants of the company and the group to which it belongs, directly or under the
terms of an option, incentive or corresponding plan approved by the Board of
Directors. The Board of Directors is authorised to suppress, limit or waive any preemptive subscription rights of shareholders to the extent it deems advisable for any
issues of shares within the authorised capital.
3.
2014 Convertible Bonds
On 20 May 2014, GAGFAH issued convertible bonds in an aggregate principal
amount of EUR 375 million, divided into bonds in bearer form with a principal
amount of EUR 100,000.00 each, which rank pari passu among themselves (the 2014
Convertible Bonds; each a 2014 Convertible Bond) which mature on 20 May 2019.
The 2014 Convertible Bonds bear interest on their principal amount at a rate of 1.50%
p.a. Since 30 June 2014, the holders of the 2014 Convertible Bonds (the
Bondholders) generally have the right, as set forth in more detail in the terms and
conditions of the 2014 Convertible Bonds, to convert their 2014 Convertible Bonds
into GAGFAH Shares. Inter alia, the Authorised Capital 2011 may be used to issue
shares with regard to the 2014 Convertible Bonds.
As of the date of this Statement, no conversion of the 2014 Convertible Bonds has
occurred. Based on the current conversion price of EUR 15.50, and assuming that
GAGFAH is not using its option to pay a cash settlement instead of delivering
GAGFAH Shares, the full exercise of all conversion rights would result in the
issuance of up to 24,193,548 shares. By the issuance of such shares, the share capital
of GAGFAH would be increased by up to 11.2%.
Under the terms and conditions of the 2014 Convertible Bonds, certain events (e.g.
capital reduction by consolidation of shares, capital increases against contribution
with subscription rights or payment of a cash dividend) will trigger an adjustment of
the conversion price of EUR 15.50 in order to prevent a dilution of the conversion
rights of the Bondholders. In addition, the conversion price will also be adjusted in the
event of a change of control (see Section V.8 of this Statement).
4.
Stock Grants to senior management and Board of Directors
Under the terms of their employment agreements, the senior management of the
German subsidiaries of GAGFAH, which consists of Messrs. Thomas Zinnöcker,
Gerald Klinck and Nicolai Kuß, is entitled to the granting of GAGFAH Shares (Stock
Grants). At the respective due date, the obligations under the Stock Grants are
generally fulfilled by granting GAGFAH Shares using the Authorised Capital 2011
or, if applicable, by transferring treasury shares of GAGFAH to the relevant
beneficiary. The granting with respect to the next tranche of these entitlements will
occur on or about 1 April 2015. In this connection, up to 360,000 new GAGFAH
Page 10
Shares will be issued (for the treatment of Stock Grants to members of the senior
management also see Section X of this Statement).
In addition, the members of the Board of Directors Gerhard Zeiler, Dr. Jürgen
Allerkamp, Mr. Dieter Ristau and Mr. Yves Wagner are, under the terms of their
service agreements, entitled to be granted a total number of 20,625 GAGFAH Shares
for the financial year 2014. In accordance with the customary practice at GAGFAH, it
is intended to issue these shares to the respective beneficiaries following the annual
general meeting of GAGFAH scheduled to be held on 12 June 2015.
Since any new GAGFAH Shares to be issued to the members of the senior
management under the next tranche of the Stock Grants or to be granted to the
members of the Board of Directors under the terms of their service agreements (to the
extent that the relevant claims are not satisfied by using treasury shares of the Target
Company) would be created, under the current plans of the Bidder for the
implementation of the Offer, only after the end of the Additional Acceptance Period
(in this regard see Section V.4 of this Statement), it must be assumed for the time
being that the Offer cannot be accepted for these GAGFAH Shares.
5.
Shareholder structure
According to the voting rights notifications received by GAGFAH under Art. 9 et seq.
of the Luxembourg Transparency Law, the following shareholders hold 5% or more
of the voting rights in GAGFAH as of the date of this Statement:
Shareholders
Lansdowne Partners
Sun Life Financial
Deutsche Asset & Wealth Management Investment GmbH, DWS
Investment S.A., Deutsche Investment Management Americas
Inc.
6.
Shares
8.5%
7.2%
5.6%
Composition of the Board of Directors and the management of GAGFAH
Holding GmbH
The governing body of GAGFAH is the Board of Directors, which consists of the
following members as of 23 December 2014:
·
Gerhard Zeiler, Chairman of the Board of Directors;
·
Dr. Jürgen Allerkamp, Vice-Chairman of the Board of Directors;
·
Dieter H. Ristau, member of the Board of Directors;
·
Yves Wagner, member of the Board of Directors, and
·
Thomas Zinnöcker, member of the Board of Directors.
Page 11
Due to a decision of the Board of Directors of 18 November 2014 to co-opt two
additional members, the Board of Directors of the Target Company will consist of the
following members as of 1 January 2015:
·
Gerhard Zeiler, Chairman of the Board of Directors;
·
Hendrik Jellema, member of the Board of Directors;
·
Daniel Just, member of the Board of Directors;
·
Dieter H. Ristau, member of the Board of Directors;
·
Yves Wagner, member of the Board of Directors, and
·
Thomas Zinnöcker, member of the Board of Directors.
The parent company of the operating subsidiaries of the GAGFAH Group is
GAGFAH Holding GmbH. GAGFAH Holding GmbH is managed by a management
that consists of three members. As of 23 December 2014, the management consists of
the following members:
7.
·
Thomas Zinnöcker (CEO);
·
Gerald Klinck (CFO) and
·
Nicolai Kuß (COO).
Overview of the business of the GAGFAH Group
GAGFAH as parent company of the GAGFAH Group is managed by the Board of
Directors which, pursuant to Art. 8 of the articles of association of GAGFAH, is
composed of three to twelve members, of which at least three members must be
“independent directors” as long as GAGFAH is listed on one or more regulated
markets. The corporate purpose of GAGFAH pursuant to its articles of association
includes the securitisation of risks, especially in connection with the interests in
German subsidiaries who hold the real estate.
At the top level of the companies operating in the housing industry stands GAGFAH
Holding GmbH, a holding company with registered office in Essen. GAGFAH
Holding GmbH is led by a management consisting of three members. The core
business of the operating subsidiaries of GAGFAH is the holding, management,
acquisition and the selective sale of residential properties in Germany. The operating
subsidiaries consider themselves as full-scale service providers for a broad range of
property and facility management services.
The average number of employees of the GAGFAH Group in the third quarter of
2014 amounted to 1,567.
Page 12
As of 30 September 2014, the real estate portfolio of the GAGFAH Group comprises
140,465 residential units, 1,550 commercial units, 28,990 parking spaces and garages,
4 senior homes and 4,725 other units.
The total residential floor space is 8.5 million square meters. The average net cold
rent from the residential portfolio as of 30 September 2014 was EUR 5.33 per square
meter. As of the same date, the vacancy rate for residential units was 3.6%.
The GAGFAH Group clusters its residential portfolio into a core and a regional noncore portfolio. The core portfolio mainly comprises properties located in the “Top 30
Cities”, a group of the largest and larger cities in Germany and their municipal areas
as determined by GAGFAH. As of 30 September 2014, the core portfolio comprised
about 89.5% of the residential units of the total residential portfolio, which at that date
accounted for more than 92% of the value of the total residential portfolio. The
remaining approximately 8% of the total portfolio value represent the regional noncore portfolio.
GAGFAH intends to divest the regional non-core portfolio in the medium term.
The external real estate property appraiser CBRE conducts for GAGFAH a periodic
valuation of the portfolio of the GAGFAH Group based on a DCF model. According
to this valuation, the real estate portfolio of the GAGFAH Group had a total value of
approx. EUR 7,643.6 million as of 30 September 2014.
8.
Summary of financial information and other company information
The financial information contained in the following tables have been taken or
derived from the audited consolidated financial statements of the Target Company for
the financial years ended 31 December 2013 (Financial Year 2013), 31 December
2012 (Financial Year 2012) and 31 December 2011 (Financial Year 2011), the
unaudited condensed consolidated interim financial statements of the company for the
nine months ended 30 September 2014 (9M2014) and the accounting records or
internal reporting systems of the Target Company. The consolidated financial
statements for the Financial Years 2013, 2012 and 2011 were prepared in accordance
with the International Financial Reporting Standards (IFRS). The unaudited
condensed consolidated financial statements of the company for 9M2014 were
prepared in accordance with the IFRS for interim financial reporting (IAS 34).
Ernst & Young société anonyme, cabinet de révision agréé, 7, rue Gabriel Lippmann,
L-5365 Munsbach, Grand Duchy of Luxembourg, audited the consolidated financial
statements of the company for the Financial Years 2013, 2012 und 2011 and issued an
unqualified opinion on each of these financial statements.
To the extent that any financial information in the following tables is specified as
“audited”, this means that such financial information has been taken from the audited
consolidated financial statements. The specification “unaudited” is used in the
following tables to indicate financial information that has not been taken from the
aforementioned audited financial statements but either from the unaudited condensed
consolidated interim financial statements or the accounting records of the company or
the internal reporting systems or are based thereon or on a calculation made on the
Page 13
basis of financial information from such sources. All financial information shown in
the text and the following tables are stated in million euros (EUR million). Unless
stated otherwise, the percentage figures in the text and the tables have been
commercially rounded to one decimal point. In this summary, zero (“0.0”) means that
the relevant figure is zero or has been rounded to zero.
a)
Selected information from the consolidated statement of comprehensive
income
For the nine months For the financial year
ended
ended
30 September
31 December
2012
2014
2013
2013 (adjusted)* 2011
unaudited
(EUR million)
Income from the leasing of investment property ..................
633.1
Transferable leasehold land interest ................................ -1.7
Operating expenses for the generation of rental
income
(excluding share-based remuneration) ................................
-336.8
Profit from the leasing of investment property ................
294.6
Income from the sale of investment property and
assets held for sale ..............................................................
135.1
Carrying amount of the sold investment property and
assets held for sale ..............................................................
-122.4
Profit from the sale of investment property and
assets held for sale .............................................................12.7
Result from the fair value measurement of
investment property ..........................................................54.0
Income from the sale of property development
projects ............................................................................... 1.7
Carrying amount of property development projects
sold.....................................................................................-0.8
Profit from the sale of property development
projects .............................................................................. 0.9
Result from other services ................................................... 1.6
Selling expenses (excluding share-based
remuneration) ................................................................ -7.0
General and administrative expenses (excluding
share-based remuneration)...................................................
-26.3
Expenses for share-based remuneration ...............................-5.7
Other operating income....................................................... 6.6
Other operating expenses ....................................................-6.6
Profit from operations before reorganization and
restructuring expenses ......................................................
324.8
Reorganization and restructuring expenses ..........................-6.8
Profit from operations ......................................................
318.0
Result from joint ventures/loss/profit from other
financial assets ................................................................ 0.0
Earnings before interest and taxes (EBIT).......................
318.0
Interest expenses ................................................................
-138.2
Interest income ................................................................ 1.1
Other financial expenses .....................................................-0.1
Result from the fair value measurement of
derivatives ................................................................
-32.8
audited
(EUR million)
632.5 829.8
-1.7 -2.2
825.9 872.2
-2.0 -2.0
-355.1 455.0
275.7 372.6
-438.4 450.6
385.5 419.6
96.0 144.1
-85.0 128.6
213.1 388.8
-194.9 366.8
11.0
15.5
18.2
22.0
4.5
5.4
1.0
1.1
4.7
2.2
-0.9
-1.0
-3.4
-1.8
0.1
1.5
0.1
1.0
1.3
2.3
0.4
3.7
-13.4 -41.9
-7.7 -12.1
-13.8 -17.5
-26.4 -34.9
-5.0 -7.0
4.2
8.8
-5.2 -7.1
-35.1 -35.0
-1.2 -3.8
11.8 34.3
-16.0 -60.2
252.7 342.3
-3.0 -7.2
249.7 335.1
339.6 321.6
-4.5 -14.6
335.1 307.0
0.1
249.8 335.1
-171.2 220.6
0.6
0.8
-0.1 -0.1
0.0 -0.1
335.1 306.9
-249.5 293.3
1.7
2.4
-0.1 -0.1
1.1
1.5
2.1
6.0
Page 14
For the nine months For the financial year
ended
ended
30 September
31 December
2012
2014
2013
2013 (adjusted)* 2011
unaudited
(EUR million)
Refinancing expenses/Interest expenses (refinancing)
-12.3
Net financing expenses ......................................................
-182.3
Earnings before taxes (EBT).............................................
135.7
Income taxes................................................................ -54.4
Net result/Net loss/Net profit ............................................81.3
audited
(EUR million)
-43.6 -67.9
-213.2 286.3
36.6 48.8
-25.8 -45.5
10.8
3.3
-3.9
-249.7
85.4
-37.7
47.7
-1.3
286.3
20.6
-38.5
-17.9
___________
*
The fair value of financial derivatives and the corresponding deferred taxes were included in the calculation for the first time
in 2012.
b)
Selected information from the consolidated statement of financial position
As of 30
September
2014
As of
31 December
2012
2013
unaudited
(€ million)
(adjusted)*
audited
(€ million)
2011
Intangible assets...............................................................
Investment property .........................................................
Property, plant and equipment ..........................................
Other financial assets .......................................................
Other assets .....................................................................
Non-current assets .........................................................
18.0
7,539.2
34.0
9.6
0.8
17.8
7,633.7
32.9
18.6
0.0
7,703.0
17.7
18.8
7,741.5 7,953.3
41.0
41.6
8.3
4.0
0.0
0.0
7,808.5 8,017.7
Inventories.......................................................................
Receivables......................................................................
Other assets .....................................................................
Current tax claims............................................................
Bank balances and cash on hand.......................................
Current assets ................................................................
Assets held for sale .........................................................
Total assets .....................................................................
11.2
26.2
45.4
6.1
168.4
257.3
104.5
7,963.4
12.0
42.6
39.9
11.8
101.9
208.2
48.6
7,959.8
12.8
21.8
31.1
37.6
37.3
59.4
15.0
8.1
175.9 200.1
272.1 327.0
31.0
21.7
8,111.6 8,366.4
Subscribed capital............................................................
Share premium................................................................
Legal reserves................................................................
Revenue reserves .............................................................
Equity attributable to the shareholders of the
parent company .............................................................
Non-controlling interests..................................................
Total equity ....................................................................
269.9
1,084.1
28.2
911.1
269.9
1,083.2
28.2
853.9
258.1 277.0
985.8 1,042,4
28.2
28.2
786.7 755.5
2,293.3
-35.7
2,257.6
2,235.2
37.1
2,272.3
2,058.8 2,103.1
30.6
33.8
2,089.4 2,136.9
Liabilities due to non-controlling shareholders..................
Pension provisions ...........................................................
Other provisions ..............................................................
Deferred tax liabilities......................................................
Liabilities from income tax ..............................................
Financial liabilities...........................................................
Other liabilities ................................................................
Deferred liabilities of government-granted loans...............
Non-current liabilities ....................................................
3.1
139.7
7.9
363.9
27.5
4,194.2
173.1
56.9
4,966.3
3.1
120.9
8.2
340.1
41.4
4,347.8
29.6
61.1
4,952.2
4.3
4.5
119.5 103.4
8.7
10.6
299.8 273.3
54.2
66.5
1,880.7 5,006.4
30.7
35.0
67.5
77.5
2,465.4 5,577.2
Page 15
As of 30
September
2014
As of
31 December
2012
2013
unaudited
(€ million)
Pension provisions ...........................................................
Other provisions ..............................................................
Liabilities from income tax ..............................................
Financial liabilities...........................................................
Other liabilities ................................................................
Deferred liabilities of government-granted loans...............
Current liabilities ...........................................................
Total liabilities................................................................
Total equity and liabilities .............................................
6.8
27.8
47.0
540.2
114.2
3.5
739.5
5,705.8
7,963.4
6.8
35.1
38.0
526.5
126.1
2.8
735.3
5,687.5
7,959.8
(adjusted)*
audited
(€ million)
2011
7.3
7.0
36.3
55.6
36.6
52.1
3,350.4 421.5
122.8 111.8
3.4
4.3
3,556.8 652.3
6,022.2 6,229.5
8,111.6 8,366.4
___________
*
c)
The fair value of financial derivatives and the corresponding deferred taxes were included in the calculation for the first time
in 2012.
Other selected operating data and parameters
· During the period 9M2014, the vacancy rate declined by 1.2 percentage points
to 3.6% as compared to 4.8% for the first nine months of the Financial Year
2013 (until 30 September 2013).
· During the period 9M2014, the indicator Funds from Operations (FFO) 1
before sales increased by EUR 61.7 million to EUR 141.3 million as compared
to EUR 79.6 million for the first nine months of the Financial Year 2013 (until
30 September 2013).
· The Net Asset Value (EPRA NAV) calculated in accordance with the
principles of the European Public Real Estate Association2 (diluted) as of the
end of the period 9M2014 amounted to EUR 2,998.9 million. (EUR 2,813.3
million as of the end of the Financial Year 2013).
For further information on GAGFAH and the development of the business of the
GAGFAH Group reference is made to the financial reports of GAGFAH published on
the internet at www.gagfah.com under Investor Relations.
1
The liquidity-related indicator FFO is derived from EBITDA, adjusted for certain non-cash items
and non-recurring items. FFO is a measure of the underlying operating performance of real estate
companies informing shareholders about the extent to which the Group is able to service its debts
or to make investments.
2
The EPRA NAV is used to highlight the fair value of equity on a long-term basis and is calculated
on the basis of the net asset value.
Page 16
III.
Information about the Bidder
1.
Basic information
According to the Offer Document, the Bidder is a European stock corporation
(Societas Europaea) that is subject to European and German law. The registered
office of the Bidder is at Münsterstraße 248, 40470 Düsseldorf and its head office is at
Philippstraße 3, 44803 Bochum. The Bidder is registered with the commercial register
of the Local Court Düsseldorf under HRB 68115.
The Bidder considers itself, based on the value of its real estate portfolio and the
number of its residential properties, as the largest residential real estate company in
the private commercial sector in Germany. Moreover, according to the Bidder, it is
the largest listed German residential real estate company and one of the ten largest
listed European real estate companies.
2.
Capital structure
According to the Offer Document, on 19 December 2014, the share capital of the
Bidder amounts to EUR 271,622,425.00 and is divided into 271,622,425 no-par-value
registered shares, each representing a proportionate amount of the share capital of
EUR 1.00 (the Existing DA Shares). The Existing DA Shares are admitted to stock
exchange trading on the Regulated Market (Regulierter Markt) of the Frankfurt Stock
Exchange with simultaneous admission to the sub-segment of the Regulated Market
with additional post-admission obligations (Prime Standard). DA is currently included
in the MDAX, the FTSE EPRA/NAREIT Global Real Estate Index and the MSCI
Germany Country Index. Furthermore, the Existing DA Shares are admitted to trading
on the Regulated Market of the Luxembourg Stock Exchange.
a)
Authorised Capitals
According to the statements by the Bidder in the Offer Document, the management
board of DA has been granted the following authorisations to increase the Bidder’s
share capital through the issuance of new shares:
· On 30 June 2013, the general meeting of DA authorised the management
board to increase the share capital of DA by a total amount of up to EUR
111,111,111.00 until 29 June 2018 once or in several instances by issuing up
to 111,111,111 new registered no-par-value shares against contributions in
cash and/or in kind with the consent of the supervisory board. After the partial
use of this authorised capital in March 2014 and in October 2014, the
management board is, under the aforementioned authorisation, still authorised
to increase the share capital by a total amount of up to EUR 83,331,111.00
once or in several instances by issuing up to 83,331,111 new registered nopar-value shares against contributions in cash and/or in kind with the consent
of the supervisory board (Authorised Capital). The shareholders are generally
to be granted the statutory pre-emptive rights for the newly issued shares.
· Furthermore, the management board was authorised by the general meeting of
DA held on 9 May 2014 to increase the share capital of DA by a total amount
Page 17
of up to EUR 25,010,101.00 until 8 May 2019 once or in several instances by
issuing up to 25,010,101 new registered no-par-value shares against
contributions in cash and/or in kind with the consent of the supervisory board.
After the partial use of this authorised capital in November 2014, the
management board is, under the aforementioned authorisation, still authorised
to increase the share capital by a total amount of up to EUR 5,410,101.00 once
or in several instances by issuing up to 5,410,101 new registered no-par-value
shares against contributions in cash and/or in kind with the consent of the
supervisory board (Authorised Capital 2014, together with the Authorised
Capital the Authorised Capitals.) The shareholders are generally to be granted
the statutory pre-emptive rights for the newly issued shares.
The Bidder states in the Offer Document that, with regard to the Authorised Capitals,
the management board is authorised to fully or partially exclude the statutory preemptive rights of the shareholders of DA once or in several instances with the consent
of the supervisory board. Such exclusion of pre-emptive rights is, in particular,
possible in the case of capital increases against contributions in kind for the granting
of shares, especially – but not limited to – for the purpose of acquiring (also
indirectly) enterprises, parts of enterprises or participations in enterprises, and other
assets in connection with a planned acquisition. In addition, an exclusion of preemptive rights is, subject to further conditions, also possible in the case of a capital
increase against contributions in cash pursuant to section 186 para. 3 sentence 4 of the
German Stock Corporation Act (Aktiengesetz) if the issuing price of the new shares is
not significantly below the market price of the shares of the same kind already listed
on the stock exchange and the portion of the share capital attributable to the new
shares issued with an exclusion of pre-emptive rights arithmetically does not exceed a
total of 10% of the share capital, either at the time of taking effect or at the time of
using of the Authorised Capital or at the time of using of the Authorised Capital 2014.
Further details on the Authorised Capitals, including details on a possible exclusion of
pre-emptive rights, are set forth in Section 5.2.2 of the Offer Document.
b)
Conditional Capital 2013
According to the Offer Document, the share capital of the Bidder is conditionally
increased by up to EUR 100,000,000.00 through the issuance of up EUR 100,000,000
new registered shares (Conditional Capital 2013). Further details on the Conditional
Capital 2013 are set forth in Section 5.2.3 of the Offer Document.
3.
Shareholder structure
According to the statements by the Bidder in Section 5.5 of the Offer Document, on
the basis of the voting rights notifications received by DA as of the date of publication
of the Offer Document in accordance with the German Securities Trading Act
(Wertpapierhandelsgesetz) (WpHG) and pursuant to information provided to DA by
the respective shareholders, the following shareholders directly or indirectly hold
more than 3% of DA’s ordinary shares:
Page 18
Shareholders
Abu Dhabi Investment Authority
Norges Bank
The Wellcome Trust
BlackRock
Sun Life Financial
4.
Shares
11.85 %
7.82 %
6.68 %
6.01 %
3.12 %
Composition of the management board and the supervisory board
According to the statements by the Bidder in the Offer Document, the management
board and of the supervisory board of DA currently consist of the following members:
a)
Management board
The members of the management board are Rolf Buch (CEO), Klaus Freiberg (COO)
and Dr. A. Stefan Kirsten (CFO).
b)
Supervisory board
The members of the supervisory board are:
· Dr. Wulf H. Bernotat, Chairman;
· Prof. Dr. Edgar Ernst, Deputy Chairman;
· Hildegard Müller, member of the supervisory board;
· Clara-Christina Streit, member of the supervisory board;
· Prof. Dr. Klaus Rauscher, member of the supervisory board;
· Manuela Better, member of the supervisory board;
· Dr. Florian Funck, member of the supervisory board, and
·
5.
Christian Ulbrich, member of the supervisory board.
Business of DA
According to the Offer Document, DA assumes the function of the management
holding company in the DA Group. In this function, it is responsible for determining
and pursuing the overall strategy and implementing the company’s goals. According
to the Bidder, DA performs property management, financing, service and coordination
tasks for the Group and is responsible for the management, control and monitoring
system as well as risk management. According to the Offer Document, to carry out
these management functions, service companies have been established to pool certain
functions in such companies, such as the central and local customer service units.
According to the statements by the Bidder in the Offer Document, the DA Group had
3,436 employees as of 30 September 2014. Further details on the business of the
Bidder, in particular the portfolio of DA, the total assets and the results are set forth in
Section 5.3 of the Offer Document.
Page 19
6.
GAGFAH Shares held by the Bidder, persons acting in concert with the
Bidder and their subsidiaries
According to the Offer Document, the Bidder, the persons acting in concert with the
Bidder and their subsidiaries do not hold any GAGFAH Shares as of the date of
publication of the Offer Document. Also no voting rights from GAGFAH Shares are
attributable to them pursuant to section 9 of the Luxembourg Law of 11 January 2008
on Transparency Requirements for Issuers of Securities.
Furthermore, the Bidder states in the Offer Document that neither the Bidder nor
persons acting in concert with the Bidder nor their subsidiaries directly or indirectly
hold financial instruments or other instruments relating to GAGFAH Shares that
correspond to the financial instruments (including the 2014 Convertible Bonds)
mentioned in sections 25 and 25a WpHG.
The Bidder attached as Annex 2 to the Offer Document a list of the persons acting in
concert with the Bidder pursuant to section 2 para. 5 WpÜG, to the extent that the
WpÜG is applicable, and pursuant to Art. 2 para. 1 lit. d), Art. 2 para. 2 of the
Luxembourg Takeover Law, to the extent Luxembourg law is applicable. According
to the Offer Document, there are no other persons acting in concert with the Bidder.
7.
Disclosures concerning securities transactions
According to the Offer Document, during the period starting six months prior to the
publication of the decision to launch the Offer on 1 December 2014 and ending with
the publication of the Offer Document on 19 December 2014, neither the Bidder nor
persons acting in concert with the Bidder within the meaning of section 2 para. 5
WpÜG nor their subsidiaries have directly or indirectly acquired any GAGFAH
Shares or concluded any agreements on the basis of which the transfer of GAGFAH
Shares could be demanded.
IV.
Background of the Offer – Business Combination Agreement dated
1 December 2014
On 1 December 2014, the Bidder published its decision to launch the Offer in
accordance with section 10 para. 1 sentence 1 WpÜG. The publication had been
agreed with the Target Company and was made promptly after the conclusion of the
Business Combination Agreement between the DA and GAGFAH regarding the
Bidder’s takeover offer to the shareholders of GAGFAH on 1 December 2014 (the
Business Combination Agreement).
The conclusion of the Business Combination Agreement was the result of intensive
negotiations between the Bidder and the Target Company. The negotiations started on
29 November 2014 after the Bidder had informed the Target Company in the evening
of 28 November 2014 that the Bidder considered to submit a takeover offer to the
shareholders of GAGFAH. The Board of Directors of GAGFAH has dealt in detail
with the takeover offer and the terms of the Business Combination Agreement in
several meetings held as telephone conferences and, in particular, intensely discussed
the adequateness of the consideration offered by the Bidder. In this connection, the
Board of Directors was advised by Deutsche Bank AG and Merrill Lynch
Page 20
International Bank Limited, Frankfurt am Main branch, as financial advisors and by
Freshfields Bruckhaus Deringer LLP and Elvinger, Hoss & Prussen (Luxembourg
Law Firm) as legal advisors. The conclusion of the Business Combination Agreement
was – in addition to the publication of the Bidder’s decision to launch the Offer in
accordance with section 10 para. 1 WpÜG – published both by the Bidder and by the
Target Company by way of ad hoc announcements pursuant to section 15 para. 1
WpHG.
Further details of the Business Combination Agreement are set out in connection with
the objectives and intentions of the Bidder and the expected effects on GAGFAH in
Section VIII.1 of this Statement. Material terms of the Business Combination
Agreement can be summarised as follows:
· The Bidder has undertaken to submit the Offer with the consideration to be
elaborated in more detail in Section VII of this Statement.
· GAGFAH has undertaken to support the Offer and to recommend the Offer to
the GAGFAH shareholders in this Statement subject to certain conditions (in
particular the review of the Offer Document). In this regard, the Board of
Directors emphasises that these undertakings and all other obligations of
GAGFAH under the Business Combination Agreement are subject to the
applicable obligations and responsibilities under German and Luxembourg
law, in particular the board members’ applicable duties of care and loyality
and fiduciary duties under corporate law.
· The Board of Directors has undertaken to manage GAGFAH, its subsidiaries
and its business, from the date of signing of the Business Combination
Agreement until the closing of the Offer, in a manner consistent with its usual
management prior to such date. Unless agreed otherwise and to the extent
permitted by law, the Board of Directors will not take certain measures that
could impede the success of the Offer, and procure that none of GAGFAH’s
subsidiaries will take such measures.
· The Business Combination Agreement has a term of three years. Each party
may terminate the Business Combination Agreement if the Offer is not
successfully completed or the other party violates material obligations under
the Business Combination Agreement.
V.
Information about the Offer
1.
Relevance of the Offer Document
The following is a summary of certain selected information contained in the Offer
Document. The Board of Directors points out that the description of the Offer in this
Statement does not claim to be exhaustive and that, as for the content and settlement
of the Offer, solely the provisions of the Offer Document are relevant. It is the own
responsibility of each shareholder of GAGFAH to consider the Offer Document and
to take the measures appropriate for such shareholder.
Page 21
2.
Implementation of the Offer
The Offer is submitted exclusively under the laws of the Federal Republic of
Germany and the laws of the Grand Duchy of Luxembourg, in particular, the WpÜG
and the German Regulation on the Content of the Offer Document, Consideration for
Takeover Offers and Mandatory Offers and the Release from the Obligation to
Publish and Issue an Offer (Verordnung über den Inhalt der Angebotsunterlage, die
Gegenleistung bei Übernahmeangeboten und Pflichtangeboten und die Befreiung von
der Verpflichtung zur Veröffentlichung und zur Abgabe eines Angebots) (WpÜGAngebotsVO), the WpÜG Applicability Regulation as well as the Luxembourg
Takeover Law.
Since GAGFAH as Target Company has its registered office in Luxembourg and the
GAGFAH Shares are exclusively admitted to trading on an organised market in
Germany, the provisions of the WpÜG apply with regard to the consideration, the
content of the Offer Document and the offer procedure (section 2 para. 3 no. 2 WpÜG
in conjunction with section 1 para. 3 WpÜG and WpÜG Applicability Regulation),
which are assessed by the German Federal Financial Supervisory Authority
(Bundesanstalt für Finanzdienstleistungsaufsicht) (BaFin). Information to be
provided to the employees of the Target Company and corporate law matters, in
particular with regard to the permissibility of measures taken by GAGFAH which
may result in defence against the takeover offer, are governed by Luxembourg law, in
particular the Luxembourg Takeover Law.
The Board of Directors has not carried out an independent review of the Offer for
compliance with the relevant provisions of law.
3.
Consideration
The Bidder offers, for each 14 GAGFAH Shares, a combined consideration of EUR
122.52 in cash and an additional consideration of 5 DA Offer Shares. Assuming
completion of the Offer by 11 March 2015 (as stated in Section 12.5 of the Offer
Document), the Bidder intends, to the extent permitted by law, to issue the DA Offer
Shares with dividend entitlement for the financial year 2014 (in this regard also see
Section VII of this Statement).
4.
Acceptance Period and Additional Acceptance Period
a)
Acceptance Period
The period for acceptance of the Offer starts with the publication of the Offer
Document on 19 December 2014 and ends on 21 January 2015, 24:00 hrs (Central
European Time; CET) (the Acceptance Period). The Acceptance Period will be
extended automatically in the following events:
· If the Bidder amends the Offer within the last two weeks prior to the end of the
Acceptance Period, the Acceptance Period will be extended by two weeks (in
accordance with section 21 para. 5 WpÜG) and will end on 4 February 2015,
24:00 hrs (CET). This also applies if the amended Offer violates any
provisions of law.
Page 22
· If a competing offer within the meaning of section 22 para. 1 WpÜG is made
by a third party during the Acceptance Period, and if the Acceptance Period
for the Offer ends prior to the end of the acceptance period for such competing
offer, the end of the Acceptance Period for the Offer will correspond to the
date on which the acceptance period of the competing offer ends (section 22
para. 2 WpÜG). This also applies if the competing offer is amended or
prohibited or violates any provisions of law.
· If GAGFAH convenes a general meeting in connection with the Offer after the
publication of the Offer Document, the Acceptance Period pursuant to
section 16 para. 3 WpÜG will be ten weeks from the publication of the Offer
Document and will end on 27 February 2015, 24:00 hrs (CET). However, this
would only be the case if such general meeting is convened upon request of a
shareholder pursuant to Art. 70 second paragraph of the Luxembourg Law on
Commercial Companies or the Bidder has, before convening such meeting,
validly waived the condition in Section 11.1.7 (No Convening of a General
Meeting) of the Offer Document. Furthermore, GAGFAH has undertaken in
the Business Combination Agreement, subject to any legal obligations, not to
convene a general meeting within the meaning of section 16 para. 3 WpÜG
during the period between the publication of the Offer Document and the end
of the Acceptance Period.
With regard to a right of withdrawal in the event of an amendment of the Offer or in
the event of a competing offer, reference is made to the statements in Section 16 of
the Offer Document.
b)
Additional Acceptance Period pursuant to section 16 para. 2 WpÜG
Shareholders of GAGFAH who have not accepted the Offer during the Acceptance
Period may still accept it within two weeks after the Bidder has published the results
of the Offer pursuant to section 23 para. 1 sentence 1 no. 2 the WpÜG (Additional
Acceptance Period), unless one of the Closing Conditions specified in Section 11.1 of
the Offer Document has not been fulfilled (and such non-fulfilment has become final)
by the end of the Acceptance Period and the Bidder has not validly waived such
Closing Condition prior to such non-fulfilment. Accordingly, the possibility of
accepting the Offer during an Additional Acceptance Period exists, in particular, only
if the Closing Condition of reaching the Minimum Acceptance Rate pursuant to
Section 11.1.4 of the Offer Document is fulfilled by no later than one working day
prior to the end of the Acceptance Period, unless such Closing Condition has been
validly waived prior to the non-fulfilment of such Closing Condition. The Minimum
Acceptance Rate may also be reduced.
According to the Offer Document and subject to an extension of the Acceptance
Period (as described above and in Section 4.3 of the Offer Document), the Additional
Acceptance Period will start – assuming that the results of the Offer are published in
accordance with section 23 para. 1 sentence 1 no. 2 WpÜG as expected on 26 January
2015 – at the beginning of 27 January 2015 and will end on 9 February 2015, 24:00
hrs (CET). After the end of this Additional Acceptance Period, the Offer can no
longer be accepted (for the description of the Sell-Out Right pursuant to Art. 16 para.
Page 23
1 of the Luxembourg Takeover Law reference is made to Section V.7 of this
Statement and Section 4.4 and Section 15.5 of the Offer Document).
The procedures that apply in connection with the acceptance of the Offer during the
Additional Acceptance Period are set forth in Section 12.7 in conjunction with
Sections 12.2 to 12.6 of the Offer Document.
5.
Creation of the DA Offer Shares and implementation of the exchange
According to Section 5.9 of the Offer Document, DA intends to acquire a maximum
of 95% (rounded down to whole shares) less 10,000 Shares of the respective
outstanding GAGFAH Shares, provided that, in the calculation of the 95%, any
GAGFAH Shares acquired by DA outside the Offer shall be taken into account and
any GAGFAH Shares held by GAGFAH or any member of the GAGFAH Group
shall be excluded. If the Offer is accepted for a number of GAGFAH Shares that
would lead to DA acquiring more than 90% of the respective outstanding GAGFAH
Shares (provided that the reaching of the 90% threshold shall be determined pursuant
to the provisions of the Luxembourg Takeover Law) as a result of the Offer (taking
into account any GAGFAH Shares acquired by DA outside the Offer), J.P. Morgan
Securities plc, 25 Bank Street, London, E14 5JP, United Kingdom, (J. P. Morgan or
Third-Party Bank) has undertaken towards the Bidder to acquire and take over
12,385,559 GAGFAH Shares (Excess Shares) (in this regard also see Section V.6 of
this Statement).
a)
Offer Capital Increase I
According to Section 13.2.1 of the Offer Document, the DA Offer Shares are intended
to be created by using the Authorised Capitals (for the capital structure of the Bidder
see Section III.2 above). The relevant capital measures can be summarised as follows:
· According to the Offer Document, the management board of DA, with the
approval of the supervisory board on 30 November 2014, resolved on
1 December 2014 to carry out a capital increase with an exclusion of preemptive rights using the Authorised Capital in a maximum amount of EUR
84,316,970.00 by issuing up to 84,316,970 no-par-value registered ordinary
shares, each representing a proportionate amount of the share capital of EUR
1.00. The DA Offer Shares from the Offer Capital Increase Ia will be issued –
to the extent permitted by law – with dividend entitlement for the financial
year 2014 (the Offer Capital Increase Ia). The Offer Capital Increase Ia is
intended to be carried out against mixed contributions in kind in the form of
those Tendered GAGFAH Shares which are intended to be acquired by the
Bidder itself (i.e. up to a number corresponding to a percentage of 95%
(rounded down to whole shares) less 10,000 Shares of the respective
outstanding GAGFAH Shares (determined by taking into account any
GAGFAH Shares acquired by DA outside the Offer).
· In the event that the Offer is accepted for a number of GAGFAH Shares that
would lead to DA acquiring more than 90% of the respective outstanding
GAGFAH Shares (provided that the reaching of the 90% threshold shall be
determined pursuant to the provisions of the Luxembourg Takeover Law) as a
Page 24
result of the Offer (taking into account any GAGFAH Shares acquired by DA
outside the Offer), the management board, with the approval of the
supervisory board on 30 November 2014, resolved on 1 December 2014 to
issue shares by way of a capital increase against cash contributions in the
amount of up to EUR 4,424,242.00 using the Authorised Capital 2014 also
with an exclusion of the statutory pre-emptive rights of the shareholders (the
Offer Capital Increase Ib; together with the Offer Capital Increase Ia the
Offer Capital Increase I). Accordingly, the Offer Capital Increase I is
intended to be carried out in part against cash contributions to the extent
necessary to enable the Exchange Trustee (as defined below) to deliver DA
Offer Shares to the GAGFAH shareholders also for the Excess Shares in
accordance with the terms of the Offer.
b)
Implementation of the exchange
In the light of the fact that the Bidder itself intends to acquire a maximum of 95%
(rounded down to whole shares) less 10,000 Shares of the respective outstanding
GAGFAH Shares only, the Bidder has made arrangements for a settlement procedure
for the implementation of the exchange as set forth in Section 12.5 of the Offer
Document, which the Board of Directors considers as reasonable with regard to the
Bidder’s intended offer structure and which can be summarised as follows:
The GAGFAH shareholders who accept the Offer transfer the Tendered GAGFAHAktien to Commerzbank Aktiengesellschaft, Kaiserplatz 60311 Frankfurt am Main,
Germany (the Exchange Trustee I) and DZ Bank AG, Deutsche ZentralGenossenschaftsbank, Frankfurt am Main, Platz der Republik, 60265 Frankfurt am
Main, Germany (the Exchange Trustee II; together with the Exchange Trustee I the
Exchange Trustees). Half of the Tendered GAFGAH Shares (rounded down to whole
shares) will be transferred to the Exchange Trustee I and the other half (rounded down
to whole shares) to the Exchange Trustee II. The transfer is initially subject to the
condition precedent that the Closing Conditions pursuant to Section 11.1 of the Offer
Document have been fulfilled, unless the Bidder has waived one or more Closing
Conditions in accordance with Section 11.3 of the Offer Document.
If the Offer is accepted for a number of GAGFAH Shares that would lead to DA
acquiring more than 90% of the respective outstanding GAGFAH Shares (provided
that the reaching of the 90% threshold shall be determined pursuant to the provisions
of the Luxembourg Takeover Law) as a result of the Offer (taking into account any
GAGFAH Shares acquired by DA outside the Offer), the Exchange Trustees as
trustees of the Third-Party Bank would hold 12,385,559 GAGFAH Shares for transfer
to the Third-Party Bank.
Accordingly, the Exchange Trustees will contribute to DA a maximum of 95% less
10,000 Shares of the respective outstanding GAGFAH Shares by way of a mixed
contribution in kind in exchange for the issuance of new DA Offer Shares subscribed
by the Exchange Trustees to fulfil the Share Component of the consideration, and
payment of a cash amount to fulfil the Cash Component of the consideration. If, as a
result of a higher Acceptance Rate, any Excess Shares have been transferred to the
Exchange Trustees, the Exchange Trustees will subscribe to the necessary extent DA
Offer Shares against cash contribution. However, any Excess Shares will not be
Page 25
contributed to DA but acquired by the Third-Party Bank J.P. Morgan (in this regard
see Section V.6 of this Statement).
The Settlement Agent, in cooperation with the Exchange Trustees, will arrange for all
DA Offer Shares created through the Offer Capital Increases, as well as the Cash
Component of the offer consideration for each Tendered GAGFAH Share, to be
transferred or credited to the securities custody accounts of the GAGFAH
shareholders who have accepted the Offer (or, in the event of a resale of the Tendered
GAGFAH Shares, to the respective purchaser of the GAGFAH Shares).
The DA Offer Shares will be transferred to the securities custody accounts held by the
custodian banks at Clearstream after the end of the Additional Acceptance Period, but
no earlier than after the registration of the implementation of the respective Offer
Capital Increase and the admission to trading on the Regulated Market (Regulierter
Markt) (Prime Standard) of the Frankfurt Stock Exchange. This constitutes an offer
by the Exchange Trustees to transfer the title to the securities the acceptance of which
by the former GAGFAH Shareholder who has tendered GAGFAH Shares is not
required to be received by the Exchange Trustees. After the admission of the DA
Offer Shares to trading on the Regulated Market (Regulierter Markt) (Prime
Standard) of the Frankfurt Stock Exchange, the DA Offer Shares are, according to the
Offer Document, intended to be also admitted to trading on the regulated market of
the Luxembourg Stock Exchange. This additional admission will, however, according
to the Bidder, have no effect on the settlement of the Offer.
If fractional DA Offer Shares with the ISIN DE000A13SUT8 arise from the exchange
ratio resulting from the offer consideration, such fractional shares do not give rise to
shareholder rights so that a rounding to whole shares (liquidation of fractional shares
(Teilrechteverwertung)) is required. Fractional shares will only be compensated in
cash. In this connection, Deutsche Bank Aktiengesellschaft, Taunusanlage 12, 60325
Frankfurt am Main (the Settlement Agent) will compulsorily consolidate any
fractional shares of the allocated DA Offer Shares to whole shares and sell such whole
shares on the stock exchange after the expiry of a deadline to be determined. The
proceeds of such sale will then be paid to the entitled GAGFAH shareholders who
tendered GAGFAH Shares in proportion to the respective fractional shares
attributable to them.
Assuming that the announcement of the results occurs on 17 February 2015 and that
all Closing Conditions (except for those relating to the registration of the
implementation of the required Offer Capital Increases) have been fulfilled at that
time or have been validly waived by the Bidder prior to the non-fulfilment of the
respective Closing Condition, the DA Offer Shares and the Cash Component are
expected to be credited by 11 March 2015, the sales proceeds are expected to be
credited without undue delay thereafter and the proceeds from the liquidation of
fractional shares are expected to be credited by 24 March 2015 to the respective
custodian banks.
If an Offer Capital Increase cannot be implemented, to the extent necessary,
immediately following the announcement of the results, e.g. because legal action has
been brought against it, the settlement of the Offer, the crediting of the DA Offer
Page 26
Shares and the Cash Component and the crediting of the proceeds from the liquidation
of fractional shares will be delayed. In this case, the settlement of the Offer and the
crediting of the DA Offer Shares and the Cash Component will be effected without
undue delay, and is expected to occur no later than eleven business days after the
elimination of the reason that obstructed the implementation of the respective Offer
Capital Increase.
6.
Agreement in the event that more than 90% of the respective outstanding
GAGFAH Shares are tendered
As set forth in more detail in Section 5.9 of the Offer Document, DA intends to
acquire a maximum of 95% (rounded down to whole shares) less 10,000 Shares of the
respective outstanding GAGFAH Shares. The Bidder states as reason for this
approach that, pursuant to section 1 para. 3 and para. 3a of the German Real Estate
Transfer Tax Act (Grunderwerbsteuergesetz) (GrEStG), the acquisition of at least
95% of the shares in a company is subject to real estate transfer tax on the properties
located in Germany belonging to said company.
If the Offer is accepted for a number of GAGFAH Shares that would lead to DA
acquiring more than 90% of the respective outstanding GAGFAH Shares (provided
that the reaching of the 90% threshold shall be determined pursuant to the provisions
of the Luxembourg Takeover Law) as a result of the Offer (taking into account any
GAGFAH Shares acquired by DA outside the Offer), J.P. Morgan as Third-Party
Bank has undertaken towards the Bidder to acquire and take over the Excess Shares
(as defined in Section V.5 above). Accordingly, if the takeover offer ist accepted for
more than 90% of the respective outstanding GAGFAH Shares, 12,385,559
GAGFAH Shares will be acquired by the Third-Party Bank.
The Exchange Trustees will transfer a maximum of 95% (rounded down to whole
shares) less 10,000 Shares of the respective outstanding GAGFAH Shares to DA
(taking into account any GAGFAH Shares acquired by DA outside the Offer but
excluding any GAGFAH Shares held by GAGFAH or any member of the GAGFAH
Group) by way of a mixed contribution in kind in connection with the Offer Capital
Increases from the Authorised Capitals. However, half of the Excess Shares will be
transferred to each of the Exchange Trustees as trustees for J.P. Morgan and thereafter
to J.P. Morgan. To the extent necessary to deliver DA Offer Shares as offer
consideration for Excess Shares to GAGFAH shareholders, the Exchange Trustees
will subscribe shares from the Offer Capital Increases against cash contribution, and
the DA Offer Shares will be transferred to the GAGFAH shareholders.
DA may terminate the underlying agreement with the Third-Party Bank at any time.
J.P. Morgan is principally obligated to dispose of the Excess Shares in the form of an
auction if DA terminates the agreement or if such termination has not occurred within
two years from 1 December 2014 and J.P. Morgan exercises its termination right.
If J.P. Morgan suffers losses from the disposal of the Excess Shares, such losses must
be compensated in cash by the Bidder (as set forth in Section 5.9 of the Offer
Document). Furthermore, the Third-Party Bank will receive a commission from the
Bidder, the amount of which depends, among other things, on the payment made
Page 27
available as consideration for the purchase of the GAGFAH Shares and the time until
the Shares are resold.
7.
Sell-Out Right of the GAGFAH shareholders; Offer Capital Increase II
a)
Sell-Out Right; Company Law Sell-Out Right
The Bidder states in Section 15.5 of the Offer Document that, under Luxembourg law,
GAGFAH shareholders who have not accepted the Offer have under certain
conditions the right to require the Bidder to acquire their GAGFAH Shares. The
Board of Directors cannot assess whether these rights will actually arise after the
completion of the Offer. The relevant rights of the GAGFAH shareholders are
described by the Bidder in the Offer Document as follows:
· Pursuant to Art. 16 para. 1 of the Luxembourg Takeover Law, GAGFAH
shareholders who have not accepted the Offer have the right to request from
the Bidder to acquire their GAGFAH Shares if the Bidder, as a result of an
offer to all shareholders of GAGFAH, holds alone or together with persons
acting in concert with it within the meaning of Art. 2 para. 1 lit. d), Art. 2
para. 2 of the Luxembourg Takeover Law, after the end of the Additional
Acceptance Period and taking into account the binding agreements on the
transfer of the Tendered GAGFAH Shares (see Section 12.6 of the Offer
Document), more than 90% of the voting rights in GAGFAH (the Sell-Out
Right). For the purposes of the Sell-Out Right, the Bidder considers any
GAGFAH Shares that are acquired by the Third-Party Bank as included in the
calculation of the aforementioned 90% threshold. The Sell-Out Right must be
exercised subject to the laws of the Grand Duchy of Luxembourg and pursuant
to Art. 16 of the Luxembourg Takeover Law, and the provisions of Art. 15
paras. 3 to 5 of the Luxembourg Takeover Law shall apply mutatis mutandis.
In particular, the Sell-Out Right must be exercised within three months
following the end of the Additional Acceptance Period (Sell-Out Period). In
the event that the Sell-Out Right is exercised, the Bidder is required to acquire
the GAGFAH Shares covered by the Sell-Out Right exercised by the
GAGFAH shareholders (GAGFAH Shares Covered by the Sell-Out) at a fair
price within the meaning of Art. 15 para. 5 of the Luxembourg Takeover Law,
with an option of the shareholder that such price be settled in cash.
· If the Bidder, after the implementation of the Offer, holds alone or together
with persons acting in concert with it within the meaning of Art. 1 para. 4 of
the Luxembourg Squeeze-Out and Sell-Out Law (as defined below) at least
95% of GAGFAH’s capital carrying voting rights and of GAGFAH’s voting
rights, the remaining GAGFAH shareholders have the right, pursuant to and
subject to the further conditions of Art. 5 para. 1 of the Luxembourg SqueezeOut and Sell-Out Law, to request from the Bidder to acquire their GAGFAH
Shares (Company Law Sell-Out Right). For the purposes of the Company
Law Sell-Out Right, the Bidder considers any GAGFAH Shares that are
acquired by the Third-Party Bank as included in the calculation of the
aforementioned 95% threshold. The exercise of the Company Law Sell-Out
Right is, in particular, subject to the provisions of Art. 2 and Art. 5 paras. 2 to
8 of the Luxembourg Law of 21 July 2012 on mandatory squeeze-out and sell-
Page 28
out (Luxembourg Squeeze-Out and Sell-Out Law). The provisions for a
Company Law Sell-Out Right as well as a company law squeeze-out are,
pursuant to Art. 2 para. 3 of the Luxembourg Squeeze-Out and Sell-Out Law,
applicable at the earliest after the expiry of a period of six months from the
extinguishment of all rights from a takeover bid within the meaning of the
Luxembourg Takeover Law, provided that, pursuant to Art. 2 para. 1 of the
Luxembourg Squeeze-Out and Sell-Out Law, the shares are admitted to
trading on a regulated market in one or more member states of the EU, or their
withdrawal from trading became effective no more than five years earlier, or
their offer to the public with the obligation to publish a prospectus did not start
more than five years earlier. In the event of an exercise of the Company Law
Sell-Out Right, the Bidder is required to acquire the GAGFAH Shares of the
GAGFAH shareholders who have exercised their Company Law Sell-Out
Right at a fair price within the meaning of Art. 5 para. 3 of the Luxembourg
Squeeze-Out and Sell-Out Law.
The Sell-Out Right and the Company Law Sell-Out Right are set forth in more detail
in Section 15.5 of the Offer Document.
b)
Offer Capital Increase II
According to Section 13.2.1(2) of the Offer Document, the management board of DA,
with the approval of the supervisory board on 30 November 2014, resolved on 1
December 2014, in the event that a Sell-Out Right of the GAGFAH shareholders (as
defined above) pursuant to Art. 16 para. 1 of the Luxemburg Takeover Law arises
after the end of the Additional Acceptance Period, to carry out an additional capital
increase with an exclusion of statutory pre-emptive rights against mixed contribution
in kind using the Authorised Capital in the amount of up to EUR 83,331,111.00 and in
a further amount of up to EUR 985,859.00 using the Authorised Capital 2014 with an
exclusion of the statutory pre-emptive rights of the shareholders by issuing no-parvalue registered ordinary shares, each representing a proportionate amount of the
share capital of EUR 1.00 (Offer Capital Increase IIa). The Bidder will create further
DA Offer Shares by way of a capital increase against cash contribution in the amount
of up to EUR 4,424,242.00 using the Authorised Capital 2014 also with an exclusion
of the statutory pre-emptive rights of the shareholders (Offer Capital Increase IIb,
together with the Offer Capital Increase IIa the Offer Capital Increase II). The Offer
Capital Increase II will only be carried out to such extent as DA Offer Shares have not
already been issued using the Authorised Capitals under the Offer Capital Increase I.
The total amount of DA Offer Shares that may be issued under the Offer Capital
Increases I and II is limited to a maximum of 88,741,212 no-par-value shares. The DA
Offer Shares from the Offer Capital Increase II will be issued, to the extent permitted
by law, with dividend entitlement for the financial year 2014.
Under the Offer Capital Increase II, a total amount of up to 88,741,212 DA Offer
Shares will be issued (to such extent as DA Offer Shares have not already been issued
using the Authorised Capitals under the Offer Capital Increase I). The amount is
calculated in such a way that, in accordance with the consideration offered by DA,
based on the total number of GAGFAH Shares outstanding at the time of publication
of the Offer plus the number of treasury shares held by GAGFAH at the time of
publication of the Offer, a sufficient number of DA Offer Shares can be issued for all
Page 29
GAGFAH Shares outstanding at the end of the deadline for exercising the Sell-Out
Right pursuant to Art. 16 para. 1 of the Luxembourg Takeover Law, less the number
of Tendered GAGFAH Shares that have been tendered by the end of the Additional
Acceptance Period. These DA Offer Shares will be issued against mixed contribution
in kind under the Offer Capital Increase Ia, to the extent that such Shares are not
Excess Shares, in which case they are issued against cash contribution under the Offer
Capital Increase Ib.
Only the Exchange Trustees are authorised to subscribe the DA Offer Shares to be
issued under the Offer Capital Increase II for the GAGFAH Shareholders. The preemptive rights of DA Shareholders are excluded.
Further details on the Offer Capital Increase II are set forth in Section 13.2.1(2) of the
Offer Document.
8.
Position of the Bondholders of the 2014 Convertible Bonds
The Board of Director points out that the implementation of the Offer may trigger a
Change of Control pursuant to the terms and conditions of the 2014 Convertible
Bonds. Pursuant to § 11 of the terms and conditions of the Bonds, a Change of
Control occurs (i) if any person or persons (the Relevant Person(s)) Acting in
Concert within the meaning of the terms and conditions of the Bonds or any person or
persons acting on behalf of any such Relevant Person(s), at any time, directly or
indirectly hold legal or beneficial ownership of shares of GAGFAH carrying in the
aggregate 33 1/3% or more of the voting rights in GAGFAH; or (ii) in the event of a
Take-over Bid where (x) shares of GAGFAH already in the direct or indirect legal or
beneficial ownership of the Bidder and/or persons Acting in Concert with the Bidder
and/or the transfer of title to which the Bidder and/or persons Acting in Concert with
the bidder may request, and (y) shares in GAGFAH in relation to which the Take-over
Bid has already been accepted, carry in aggregate 33 1/3% or more of the voting
rights in GAGFAH, provided that in the event of a Conditional Take-over Bid a
Change of Control will be deemed to have occurred only if the Offer Conditions have
been met or if they have been waived, i.e. that the settlement of the Take-over Bid
would not fail as a result of any Offer Conditions. An “Offer Condition”, within the
meaning of the terms and conditions of the Bonds, exists where the Bidder has made
the effectiveness of the Take-over Bid conditional on any condition within the
meaning of section 18 para. 1 WpÜG being met, provided that conditions the
satisfaction of which remains pending after the last day of the acceptance period
pursuant to section 16 para. 1 WpÜG do not qualify as Offer Condition for the
purposes of § 11 of the terms and conditions of the Bonds.
As soon as practicable after becoming aware of the occurrence of a Change of
Control, GAGFAH must give notice of such fact and fix an Effective Date which
must be not less than 40 nor more than 60 calendar days after the date of the notice.
As set forth in more detail in the terms and conditions of the Bonds, each Bondholder
may on giving not less than 10 calendar days’ notice prior to the Effective Date
declare all or some only of his 2014 Convertible Bonds not previously converted or
redeemed due by giving a put notice to GAGFAH, which notice shall take effect on
the Effective Date, and demand payment of their principal amount plus interest
Page 30
accrued thereon. Alternatively, each Bondholder may exercise his conversion right at
an adjusted conversion price until the Effective Date, as set forth in more detail in the
terms and conditions of the Bonds. For an example of a possible adjustment of the
conversion price see Section 6.2.4 of the Offer Document.
The adjusted conversion price is calculated using the following formula:
where:
CPa = the adjusted conversion price;
CP = the conversion price immediately prior to the date on which the Change of
Control occurs;
Pr = the initial conversion premium of 30%;
c = the number of days from and including the date on which the Change of Control
occurs to but excluding the maturity date; and
t = the number of days from and including the date of the issuance of the Bonds to but
excluding the maturity date.
There will be no adjustment of the conversion price (i) if, by applying the above
formula, CPa would be greater than CP or (ii) to the extent that, by applying the above
formula, the conversion price for one GAGFAH Share would thereby be reduced
below the nominal value effective as of the date of such adjustment.
The Board of Directors cannot say whether a Change of Control will occur as a result
of the implementation of the Offer. The Bidder assumes in the Offer Document that a
Change of Control will occur at the end of the Acceptance Period (see Section 6.2.4 of
the Offer Document). To the extent that GAGFAH Shares are created by conversion
before the end of the Additional Acceptance Period, the Offer also relates to such
GAGFAH Shares (see Section 6.2.4 of the Offer Document). The Board of Directors
points out that the GAGFAH Shares to be delivered must, as set forth in more detail in
the terms and conditions of the Bonds, be credited by no later than the 15th business
day following the conversion date. GAGFAH intends to make available the GAGFAH
Shares through the Principal Conversion Agent as soon as possible after valid exercise
of the conversion right in order to enable the Bondholders to accept the Offer within
the Additional Acceptance Period. However, GAGFAH assumes no warranty or
liability for the delivery of the GAGFAH Shares within the Additional Acceptance
Period. After the end of the Additional Acceptance Period, there may exist the
possibility to require the Bidder to acquire GAGFAH Shares in respect of which the
Offer has not been accepted in accordance with the Sell-Out Right or the Company
Law Sell-Out Right (in this regard see Section V.7 above). The Board of Directors
cannot assess whether these rights will arise after the completion of the Offer.
The Board of Directors points out that each Bondholder must carefully consider
himself the risks and rewards associated with a possible Change of Control and with
Page 31
the decision on whether and at which time such Bondholder will exercise his
conversion right, and recommends that Bondholders should obtain individual tax and
legal advice if necessary. In this connection, Bondholders should also take into
account any restrictions of the conversion right and settlement periods that may apply
in the case of exercise of their conversion right.
9.
Closing Conditions
The Offer and the agreements with the GAGFAH shareholders which come into
existence as a result of its acceptance will only be consummated if the Closing
Conditions set forth in Section 11.1 of the Offer Document (the Closing Conditions)
have been fulfilled or the Bidder has validly waived the relevant Closing Condition
prior to its non-fulfilment. The Board of Directors believes that the Closing
Conditions are in line with customary practice in transactions of that kind and have
due regard to legitimate interests of the Bidder and the Target Company. The Closing
Conditions can be summarised as follows:
a)
Merger control clearance
· Clearance of the transaction by the German Federal Cartel Office
(Bundeskartellamt) by no later than six months after the end of the Acceptance
Period or other permissibility of the takeover under merger control laws in
accordance with Section 11.1.1 of the Offer Document.
b)
Registration of the Offer Capital Increase I
· The implementation of the Offer Capital Increase I, insofar as it will be carried
out against contribution in kind and to the extent necessary to settle the Offer,
has been registered with the commercial register of the Local Court Düsseldorf
by no later than six months after the end of the Acceptance Period (including
any extensions).
· The implementation of the Offer Capital Increase I, insofar as it will be carried
out against cash contribution and to the extent necessary to settle the Offer,
has been registered with the commercial register of the Local Court Düsseldorf
by no later than six months after the end of the Acceptance Period (including
any extensions). This Closing Condition only applies if Excess Shares are
created as a result of the acceptance rate.
c)
No material decline of the FTSE EPRA/NAREIT Germany Real Estate Index
or of the MDAX
At the end of the Acceptance Period, the last daily closing level
· of the FTSE EPRA/NAREIT Germany, as determined by FTSE International
Limited, London, UK, and published on its website, is not below 598.8 points;
and
· of the MDAX, as determined by Deutsche Börse AG, Frankfurt am Main,
Germany, and published on its website, is not below 14,436.62 points.
Page 32
Each of the two aforementioned conditions represents an independent Closing
Condition.
d)
Minimum Acceptance Rate
At the end of the Acceptance Period, the sum of all
· Tendered GAGFAH Shares which were tendered within the Acceptance
Period and for which the right to withdrawal, if applicable, has not been
validly exercised in accordance with the Offer Document,
· GAGFAH Shares held directly by the Bidder, any member of the DA Group or
any person acting in concert with the Bidder within the meaning of section 2
para. 5 WpÜG,
· GAGFAH Shares that must be attributed to the Bidder or any member of the
DA Group in corresponding application of section 30 WpÜG,
· GAGFAH Shares for which the Bidder, any member of the DA Group or any
person acting in concert with the Bidder within the meaning of section 2 para.
5 WpÜG has entered into an agreement outside of the Offer, giving them the
right to demand the transfer of title to such GAGFAH Shares, and
· GAGFAH Shares that are deliverable under conversion rights under the 2014
Convertible Bond, whereby, according to the calculation made by the Bidder,
in respect of each of the 3,750 bonds with a respective principal amount of
EUR 100,000 8,127.6944 GAGFAH Shares are counted as of 21 January
2015, i.e. the expected effective date of the Change of Control for the purpose
of this condition, and these conversion rights are only included in the
calculation for the purpose of this condition
§ to the extent that the 2014 Convertible Bonds are held directly by the
Bidder, any member of the DA Group or any person acting in concert
with the Bidder within the meaning of section 2 para. 5 WpÜG prior to
the end of the Acceptance Period,
§ to the extent that the 2014 Convertible Bonds would have to be
attributed to the Bidder or any member of the DA Group at the end of
the Acceptance Period in corresponding application of section 30
WpÜG, whereby the aforementioned number of GAGFAH Shares in
respect of the 2014 Convertible Bonds are included in the calculation,
or
§ to the extent that the Bidder, any member of the DA Group or any
person acting in concert with the Bidder within the meaning of section
2 para. 5 WpÜG has concluded an agreement outside the Offer, giving
it the right to demand (a) the transfer of title to the 2014 Convertible
Bonds or (b) the acceptance of the Offer or to otherwise demand the
transfer of title to the GAGFAH Shares to be delivered under the 2014
Convertible Bonds;
Page 33
(provided that GAGFAH Shares falling within several of the aforementioned
categories may be counted only once) exceeds a Minimum Acceptance Rate of 57 %
of the GAGFAH Shares issued at the time of publication of the Offer Document
increased, if applicable, by the number of GAGFAH Shares issued under capital
increases prior to the end of the Acceptance Period (without taking into account any
increase of the share capital due to the Convertible Bond) (the Relevant GAGFAH
Shares) (the Minimum Acceptance Rate). In Section 11.1.4 of the Offer Document,
the Bidder has made available a sample calculation for reaching the Minimum
Acceptance Rate.
e)
No material increase of the share capital
Between the publication of the Offer Document and the end of the Acceptance Period,
the share capital of GAGFAH has not been increased by more than 0.5%; the
calculation of this 0.5% threshold does not take into account a possible increase of the
share capital of GAGFAH resulting from the exercise of the conversion rights under
the 2014 Convertible Bond.
f)
No convening of a general meeting
Between the publication of the Offer Document and the end of the Acceptance Period,
GAGFAH has convened no general meeting within the meaning of section 16 para. 3
WpÜG (unless such general meeting is convened by request of a shareholder pursuant
to Art. 70 second paragraph of the Luxembourg Law on Commercial Companies).
g)
No dividends, amendments to the articles of association or liquidation
Between the publication of the Offer Document and the end of the Acceptance Period,
none of the following events has occurred:
· GAGFAH has distributed a cash or non-cash dividend or decided on a capital
increase from company funds (other than in connection with a compensation
for any lack of dividend entitlement of the DA Offer Shares for the financial
year 2014, in this regard also see Section VII of this Statement);
· the general meeting of GAGFAH has adopted a resolution to amend the
articles of association, (i) by which a majority requirement is increased for
some or all resolutions of the general meeting or other corporate bodies of
GAGFAH or (ii) which results in a share split, a consolidation of shares or a
change of the rights attaching to the shares or nature of the shares;
· the general meeting of GAGFAH has adopted a resolution to dissolve
GAGFAH.
Each of the aforementioned conditions represents an independent Closing Condition.
h)
No material transaction
Between the publication of the Offer Document and the end of the Acceptance Period,
neither GAGFAH nor any subsidiary of GAGFAH has committed or undertaken a
Page 34
material transaction as described in Section 11.1.8 of the Offer Document with a
threshold value of more than EUR 300,000,000, individually or in the aggregate.
i)
No Material Adverse Change
Between the publication of the Offer Document and the end of the Acceptance Period,
GAGFAH has not published any new circumstances within the meaning of section 15
WpHG, and no circumstances have occurred that would have had to be published by
GAGFAH pursuant to section 15 WpHG or that GAGFAH did not publish because of
a self-exemption pursuant to section 15 para. 3 of the WpHG, which, individually or
in the aggregate, result or can be reasonably expected to result in a decrease of the
recurring FFO before sales (as defined in GAGFAH’s interim report as of 30
September 2014) of the GAGFAH Group for the financial year 2014 or 2015 by at
least EUR 20 million each (Material Adverse Change).
j)
No Material Compliance Violation
Between the publication of the Offer Document and the end of the Acceptance Period,
· no violation by GAGFAH of any social clauses, rights of nomination, tender
obligations, investment obligations, letting or similar sales obligations that are
agreed upon in connection with the privatisation of public housing stocks; and
· no criminal or administrative offense committed by a member of a governing
body, officer, employee, agent or consultant of GAGFAH or any subsidiary of
GAGFAH in the performance of his duties with regard to GAGFAH or any
subsidiary of GAGFAH
becomes known where such violation or criminal or administrative offense constitutes
or would constitute inside information for GAGFAH pursuant to section 13 WpHG if
it were not published (Material Compliance Violation).
k)
No loss in the amount of the share capital, no insolvency proceedings
Between the publication of the Offer Document and the end of the Acceptance Period,
GAGFAH has published no notification pursuant to section 15 WpHG stating that
· a loss in the amount of at least half of the share capital pursuant to Art. 100
first and second paragraph of the Luxembourg Law on Commercial
Companies has occurred, or
· an application for insolvency proceedings pursuant to sections 442 et seq. of
the Luxembourg Commercial Code over the assets of GAGFAH has been filed
or such insolvency proceedings have been opened.
Each of the aforementioned conditions represents an independent Closing Condition.
If the Closing Condition pursuant to Section 11.1.1 of the Offer Document (merger
control clearance) and the Closing Condition regarding the Offer Capital Increase I
pursuant to Section 11.1.2 of the Offer Document have not been fulfilled six months
Page 35
after the end of the Acceptance Period (including any extensions pursuant to
section 16 para. 3, section 21 para. 5 and/or section 22 para. 2 WpÜG) at the latest or
if any of the Closing Conditions pursuant to Sections 11.1.3 to 11.1.11 of the Offer
Document has not been fulfilled by the end of the Acceptance Period or the Bidder
has not validly waived, in accordance with section 21 para. 1 sentence 1 no. 4 WpÜG,
any of the Closing Conditions pursuant to Section 11.1.1 of the Offer Document or
pursuant to Sections 11.1.3 to 11.1.11 of the Offer Document by no later than one
working day prior to the end of the Acceptance Period and prior to the non-fulfilment
of the relevant Closing Condition, the Offer will lapse. In this case, the agreements
that come into existence as a result of the acceptance of the Offer will not be
consummated and will cease to exist (condition subsequent). Tendered GAGFAH
Shares will be re-transferred where necessary to each respective custodian bank and
will be re-booked by such custodian bank. Accordingly, the custodian banks must
procure that the Tendered GAGFAH Shares and the GAGFAH Shares Covered by the
Sell-Out are re-booked into LU0269583422 (WKN A0LBDT) without undue delay
and, in any event, no later than five business days after the lapse of the Offer has been
announced. Further details on the unwinding in case of non-fulfilment of the Closing
Conditions are set out in Section 11.4 of the Offer Document.
10.
Waiver of Closing Conditions
Pursuant to Section 11.3 of the Offer Document, the Bidder reserves the right, up until
one working day prior to the end of the Acceptance Period, to waive one, several or
all of the Closing Conditions (with the exception of the Closing Condition in
Section 11.1.2 of the Offer Document (Registration of the Offer Capital Increase I)
which cannot be waived) and/or to reduce the Minimum Acceptance Rate. Any
Closing Conditions validly waived by the Bidder will be deemed to have been
fulfilled for the purposes of the Offer. If the Bidder waives one, several or all of the
Closing Conditions or reduces the Minimum Acceptance Rate within the last two
weeks before the end of the Acceptance Period, the Acceptance Period will be
extended by two weeks in accordance with section 21 para. 5 WpÜG (and, based on
the assumption that the Acceptance Period will end on 21 January 2015, will end on 4
February 2015, 24:00 hrs (CET)).
11.
Trading in Tendered GAGFAH Shares
Pursuant to Section 12.8 of the Offer Document, the Bidder will ensure that the
Tendered GAGFAH Shares will be admitted to trading on the Regulated Market
(Regulierter Markt) of the Frankfurt Stock Exchange under ISIN LU0052862774
(WKN A12 GFH) starting from the third trading day of the Frankfurt Stock Exchange
following the commencement of the Acceptance Period. It is expected that trading in
the Tendered GAGFAH Shares on the Regulated Market (Regulierter Markt) of the
Frankfurt Stock Exchange will end after the close of the trading session one day
before the filing date for the registration of the implementation of the required Offer
Capital Increases. The date on which the trading ends will be published by the Bidder
without undue delay via an electronically operated information dissemination system
within the meaning of section 10 para. 3 sentence 1 no. 2 WpÜG or in the Federal
Gazette (Bundesanzeiger).
Page 36
12.
Status of regulatory approvals and proceedings
In Section 10.1 of the Offer Document, the Bidder states that the transaction is subject
to merger control by the German Federal Cartel Office (Bundeskartellamt) pursuant to
sections 35 et seq. of the German Act Against Restraints of Competition (Gesetz
gegen Wettbewerbsbeschränkungen (GWB)). The Bidder intends to notify the
proposed takeover of GAGFAH to the Federal Cartel Office on 2 January 2015. The
Bidder expects that the merger control clearance proceedings will be terminated in the
so-called first phase proceedings (Vorprüfverfahren), i.e. within a period of one
month of receipt of the complete notification. Pursuant to the Offer Document, a
notification of the transaction to the EU Commission pursuant to Council Regulation
(EC) No 139/2004 was not required.
13.
Closing
If the other Closing Conditions have been fulfilled by the end of the Acceptance
Period, the Offer will continue to be subject to the Closing Condition regarding the
registration of the Offer Capital Increase I set out in Section V.9.b) of this Statement
and, if not yet granted by such date, the clearance by the German Federal Cartel
Office (Bundeskartellamt).
According to Section 12.5 of the Offer Document, if, in addition to the clearance by
the Federal Cartel Office, also the registration of the Offer Capital Increase I occurs as
scheduled and the relevant Closing Condition is fulfilled, the DA Offer Shares, the
Cash Component and the sales proceeds and the proceeds from the liquidation of
fractional shares are expected to be credited in March 2015. The registration of the
Offer Capital Increase I and the clearance by the Federal Cartel Office must occur by
no later than six months after the end of the Acceptance Period; otherwise the relevant
Closing Condition cannot be fulfilled.
If an Offer Capital Increase cannot be implemented, to the extent necessary,
immediately following the announcement of the results, e.g. because legal action has
been brought against it, the settlement of the Offer, the crediting of the DA Offer
Shares and the Cash Component and the crediting of the proceeds from the liquidation
of fractional shares will be delayed.
14.
Applicable law
The Bidder states in Section 1.1 and Section 20 of the Offer Document that the Offer
and the agreements that come into existence as a result of acceptance of the Offer are
governed by German law. The exclusive place of jurisdiction for all legal disputes
arising from or in connection with this Offer (and any agreement which comes into
existence as a result of acceptance of the Offer) is, to the extent permitted by law,
Frankfurt am Main, Germany.
Information to be provided to the employees of the Target Company and corporate
law matters concerning GAGFAH, in particular squeeze-out and sell-out matters (as
described in Section 15.3 of the Offer Document), are governed by the laws of the
Page 37
Grand Duchy of Luxembourg. The place of jurisdiction for legal disputes on such
matters may in some circumstances also be Luxembourg.
15.
Publications
According to Section 11.5 of the Offer Document, the Bidder will publish without
undue delay on the internet at the website http://www.deutsche-annington.com/ under
the Investor Relations section and in the Federal Gazette (Bundesanzeiger) if (i) a
Closing Condition has been fulfilled, (ii) a Closing Condition has been waived by the
Bidder, (iii) all Closing Conditions which have not been waived have been fulfilled,
or (iv) the Offer will not be completed.
With regard to the publication of the results of the Offer and with regard to other
publications, reference is made to Section 18 of the Offer Document.
VI.
Financing of the Offer
Pursuant to section 13 para. 1 sentence 1 WpÜG, the Bidder must, prior to the
publication of the Offer Document, take the measures necessary to ensure that at the
time at which the claim for the consideration falls due it has at its disposal the means
necessary for full performance of the Offer. On the basis of the statements made by
the Bidder in the Offer Document, the Board of Directors assumes that the Bidder has
fulfilled this obligation.
1.
Delivery obligation (Share Component); financing of
contributions and the Cash Component for Excess Shares
the
cash
At the time of publication of the Offer Document on 19 December 2014, GAGFAH
had issued 215,952,555 shares. According to the calculation made by the Bidder in
Section 6.2.4 of the Offer Document, in the event that all holders of the 2014
Convertible Bond exercise their conversion right at an adjusted conversion price, the
number of issued GAGFAH Shares would increase by up to 30,478,854 Shares to up
to 246,431,409 GAGFAH Shares by the end of the Additional Acceptance Period.
According to Section 13.1 of the Offer Document, assuming acceptance of the Offer
with respect to 246,431,409 GAGFAH Shares, this results in an obligation of the
Bidder to deliver a total number of 88,011,218 DA Shares, i.e. 246,431,409 multiplied
by the exchange ratio of 5/14 per GAGFAH Share (the Delivery Obligation).
In order to be able to meet its Delivery Obligation, the Bidder will implement the
Offer Capital Increases described in Section V.5 and Section V.7 of this Statement.
As stated by the Bidder in Section 13.2.1 of the Offer Document, it can create up to
88,741,212 DA Offer Shares through the Offer Capital Increases and, accordingly, it
would be able to meet its Delivery Obligation. As stated by the Bidder in Section 3 of
the Offer Document under “Settlement” of the Offer, there is a risk that delays may
occur with regard to the implementation of the Offer Capital Increases, e.g. due to
legal action brought against the Offer Capital Increases.
Page 38
Furthermore, the Bidder states in Section 13.2.2 of the Offer Document that, on the
basis of an issue price of EUR 25.90 per share, the maximum amount required for
cash contributions in connection with an implementation of the Offer Capital Increase
Ib and the Offer Capital Increase IIb would be approx. EUR 114,554,000. To this
must be added the Cash Component for the GAGFAH Shares tendered in this
connection in the maximum amount of approx. EUR 108,391,000. Accordingly, liquid
funds in the total amount of up to approx. 222,939,000 would be required for the cash
contributions and the Cash Component for the Excess Shares. As stated by the Bidder
in Section 13.2.2 of the Offer Document, J.P. Morgan has made available liquid funds
in a sufficient amount.
2.
Total Transaction Costs
According to Section 13.1 of the Offer Document, the Bidder continues to expect that
it could incur total transaction costs in a maximum amount of approx. EUR 2,336.6
million (the Total Transaction Costs), which includes an amount of up to approx.
EUR 2,156.6 million for payment of the Cash Component as consideration for all
outstanding GAGFAH Shares plus transaction costs in a total amount of approx.
EUR 180 million. As stated by the Bidder in Section 13.2.3 of the Offer Document, it
has at its disposal the means necessary for full performance of these obligations,
namely in the form of a bank credit facility (the DA Credit Agreement) in the amount
of at least EUR 1,650 million, proceeds from the placement of a subordinated hybrid
bond in the amount of approx. EUR 991 million and liquid funds of the DA Group
(including unused credit lines) in an amount of approx. EUR 721 million as of
30 November 2014.
VII.
Type and amount of the consideration offered
1.
Type and amount of the consideration offered
For fourteen GAGFAH Shares, the Bidder offers a combined consideration
comprising the payment of an amount of EUR 122.52 as Cash Component and five
DA Offer Shares as Share Component. This results in an offer consideration per
GAGFAH Share of around EUR 8.75 for the Cash Component and of 0.357
(equivalent to 5/14th rounded) DA Offer Shares for the Share Component.
To the extent legally possible and assuming that the Offer will be consummated in
March 2015 (as set out in Section 12.5 of the Offer Document), the Bidder intends to
issue the DA Offer Shares with a dividend right for the financial year 2014. Should
this eventually not be possible, the undiscounted loss in value per DA Share, due to
the lack of dividend rights for the financial year 2014, based on the information that
the Bidder has provided in its consolidated interim report for the nine-month period
ending on 30 September 2014 in which the Bidder announced a payment of a
dividend for 2014, is according to the Offer Document calculated to be EUR 0.78 per
share. In the event that the DA Offer Shares may not be issued with dividend rights
for the financial year 2014, DA and GAGFAH have agreed in the Business
Combination Agreement dated 1 December 2014 to work together, to provide to the
GAGFAH shareholders a corresponding economic compensation by means of an
interim dividend payment prior to consummation of the Offer, it being understood that
Page 39
DA, to the extent necessary, will make available to GAGFAH corresponding liquid
funds. As an alternative to such advanced distribution by GAGFAH, the Bidder may
decide to provide by other means an adequate financial compensation for a nonexisting dividend right for the financial year 2014 to the GAGFAH Shareholders who
have accepted the Takeover Offer. The Board of Directors points out that the
shareholders do not have a direct claim of their own under the Business Combination
Agreement as regards enforcement of this provision against DA or GAGFAH.
However, the Guarantors shall monitor compliance with the provisions of the
Business Combination Agreement, and each Guarantor is entitled and authorised to
assert in its own right at any time the fulfilment of the contractual obligations by DA
and GAGFAH and, if need be, to enforce this in front of an arbitration court (for the
function of the Guarantors, see also Section VIII.1 of this Statement).
Following a thorough analysis, the Board of Directors deems the Consideration
offered by the Bidder to be adequate both in terms of its type and its amount.
1.1
Statutory requirements regarding the type of consideration
As consideration, the Offer provides for a fixed Share Component besides the Cash
Component. The capital measures required for providing the DA Offer Shares shall be
implemented by capital increases from the Bidder’s Authorised Capital, which the
management board of the Bidder resolved on with the approval of the supervisory
board on 1 December 2014 (in this respect, see Section V.5 of this Statement).
Based on the descriptions contained in the Offer Document, the Board of Directors
comes to the conclusion that the DA Offer Shares comply with the statutory
requirements for the Share Component of the consideration as part of a takeover bid.
According to section 31 para. 2 WpÜG, the offered shares must be liquid and listed
for trading on an organised market within the meaning of section 2 para. 7 WpÜG.
Further, since they are being offered to the holders in exchange for shares with voting
rights, they must likewise grant voting rights.
According to the Offer Document, the DA Offer Shares will be voting shares in the
same way as the Existing DA Shares are.
According to the Offer Document, the DA Offer Shares will be listed on the regulated
market (Prime Standard) of the Frankfurt Stock Exchange still prior to the transfer to
the accepting GAGFAH Shareholders.
The DA Offer Shares will be newly created. Therefore, there are no historic values
with respect to the liquidity of the DA Offer Shares. Firstly, it suggests itself that the
liquidity of newly created shares that grant the same rights as already existing shares
(i.e., belong to the same class) will not notably deviate from the liquidity of the
already existing shares or fall short of such liquidity. In the case of the DA Offer
Shares, however, this will not apply without reservations, if - unlike intended by the
Bidder - the DA Offer Shares can be issued with a dividend right not for the financial
year 2014, but only with dividend rights as from 1 January 2015. In this scenario, the
DA Offer Shares would, at least initially, not be liquid to the same extent as the
existing DA shares.
Page 40
Apart from this possible temporary restriction due to a dividend entitlement of the DA
Offer Shares that may initially differ from that of the Existing DA Shares, the Board
of Directors nevertheless deems it plausible to consider the liquidity of the Existing
DA Shares as an indicator for the liquidity of the DA Offer Shares. The Board of
Directors deems the Existing DA Shares to be liquid shares. According to DA’s
interim financial statement for the 3rd quarter of 2014, 77.76% of the Existing DA
Shares were in free float as per 30 September 2014, as defined in the Guidelines for
Stock Indexes of Deutsche Börse issued by Deutsche Börse AG3. Within the scope of
this calculation, DA considered only the interests held by Abu Dhabi Investment
Authority and Norges Bank not to be free float. Making this calculation on the basis
of the interests held in DA as reported by the Bidder under Section 5.5 of the Offer
Document as per the date of the Offer Document’s publication, the Existing DA
Shares in free float amount to 80.33% according to the definition of Deutsche Börse.
Over the three-months period preceding the announcement of the Offer on
1 December 2014, stock exchange prices were established for the Existing DA Shares
at the Frankfurt Securities Exchange on all trading days. The average Xetra trading
volume per day during that period amounted to 889,744 pieces, which is equal to
approximately 0.34% of the Bidder’s issued shares.4 The maximum deviation of the
Xetra closing price of a stock market trading day from the Xetra closing price of the
preceding stock market trading day within that period amounted to 2.88%5 and thus
was lower than 5% and therefore below the figure that the Board of Directors took as
a basis for assessing the liquidity of the Existing DA Shares inter alia, on the basis of
a corresponding application of section 5 para. 4 WpÜG-AngebotsVO. Furthermore,
the DA Share – such as the GAGFAH Share – is listed in the MDAX.
The Board of Directors does neither assume that the liquidity of the DA Shares will
decrease upon implementation of the Offer to such an extent that the shares are then
no longer considered liquid. In particular, against the background of the Bidder’s
current shareholder structure described in the Offer Document, it cannot be expected
that a shareholder will increase his interest to such an extent that this will have a
decisive negative impact on trading volumes and consequently on the liquidity. 6 Also
following the implementation of the Takeover Offer, sufficient liquidity is therefore to
be expected.
In its overall assessment, the Board of Directors takes the view that the DA Offer
Shares can be regarded as a sufficiently liquid consideration within the meaning of
Section 31 para. 2 WpÜG.
Pursuant to section 31 para. 3 WpÜG, the Bidder has to offer the GAGFAH
Shareholders a cash consideration in euro if the Bidder, persons acting jointly with it
or their subsidiaries have acquired - during the six months prior to the publication of
3
Source: p. 9 of the Bidder’s interim financial statement for the 3rd quarter of 2014 (reporting date:
30 September 2014)
4
In the period from 29 August through 28 November 2014, source: Bloomberg
5
In the period from 29 August through 28 November 2014, source: Bloomberg
6
As shown in the Offer Document, Abu Dhabi Investment Authority for the time being is the most
important shareholder of DA, holding 11.85% of the voting rights.
Page 41
the decision to launch the Offer to the expiration of the Acceptance Period - 5% or
more of the shares or the voting rights of GAGFAH against a cash consideration.
Such an acquisition of at least 5% of the shares or voting rights was not reported to
GAGFAH pursuant to Art. 8 et seqq. of the Luxembourg Transparency Act up to now,
and is also not otherwise known to the Board of Directors. According to the Offer
Document, the Bidder does not hold any GAGFAH Shares at the date of the
publication of the Offer Document. Hence, the Board of Directors deems the Share
Component of the consideration to be admissible for the time being also under this
aspect.
1.2
Statutory requirements as to the amount of the consideration
The legal requirements as to the minimum amount of the consideration are complied
with from the point of view of the Board of Directors on the basis of the information
contained in the Offer Document. The legal minimum amount of the consideration is
to be measured, on the one hand, by the requirements the law applies to the valuation
of the GAGFAH Shares. As part of the consideration consists of shares, on the other
hand the legal maximum value must be determined at which the DA Offer Shares may
be assessed when measuring the value of the consideration.
a)
Legal minimum value of the consideration for GAGFAH Shares
In the case of takeover bids for shares admitted to trading at a German stock
exchange, pursuant to section 31 paras. 1, 2 and 7 WpÜG in conjunction with section
5 paras. 1 and 3 WpÜG-AngebotsVO, the Consideration must be equivalent at least to
the volume-weighted average domestic stock exchange price of those shares over the
course of the last three months prior to publication of the decision to submit the Offer
on 1 December 2014 According to the Offer Document, the weighted average stock
exchange price of the GAGFAH Shares over the course of the last three months prior
to publication of the Bidder’s decision to launch the Offer on 1 December 2014, i.e. in
the period from 1 September 2014 (including) through 30 November 2014, amounted
to EUR 14.82, as reported by BaFin to the Bidder on 9 December 2014.
Pursuant to section 31 paras. 1, 2 and 7 WpÜG in conjunction with section 4 of the
WpÜG-AngebotsVO, the consideration for the GAGFAH Shares must be at least
equivalent to the highest consideration provided or agreed to by the Bidder, a person
acting in concert with the Bidder, or a subsidiary, for the acquisition of shares in the
Target within the last six months prior to the publication of the Offer Document.
According to the Offer Document, no such prior acquisitions took place during the
six-month period. The Board of Directors does not have any indications regarding
such a prior acquisition from other sources, either.
According to the Offer Document, the Bidder in determining the consideration takes
the value of the Cash Component into account in an amount of EUR 8.75 per
GAGFAH Share, and the value of the Share Component with EUR 8.76, which results
in a consideration per GAGFAH Share amounting to EUR 17.51 in total. This
consideration is higher than the minimum price to be offered pursuant to section 5
WpÜG-AngebotsVO amounting to EUR 14.82 and, therefore, complies with the legal
Page 42
requirements pursuant to section 31 paras. 1, 2 and 7 WpÜG in conjunction with
section 5 paras. 1 and 3 WpÜG-AngebotsVO.
b)
Legal maximum value of the DA Offer Shares
Pursuant to sections 5, 7 WpÜG-AngebotsVO, the DA Offer Shares may be taken into
account with no more than the value of the volume-weighted average stock exchange
price of those shares over the course of the last three months prior to publication of
the decision to launch the Offer. This value amounts to (rounded) EUR 24.53 for the
Existing DA Shares in the three-month period up to 1 December 2014, i.e. as per the
effective date 30 November 2014, according to the Offer Document as notified by
BaFin to the Bidder on 9 December 2014. The Bidder takes this value as a basis for
calculating the Share Component if it states in the Offer Document that, taking
account of the exchange ratio of five DA Offer Shares to fourteen GAGFAH Shares,
the result is an evaluation of the Share Component as consideration per GAGFAH
Share of approximately EUR 8.76 (5/14 multiplied with EUR 24.53).
However, a potentially missing dividend right of the DA Offer Shares for the financial
year 2014 is to be considered also when assessing the admissible maximum value of
the DA Offer Shares. This is to say that if the DA Offer Shares are entitled to
dividend as from 1 January 2015 only, the average rate of exchange of the existing
DA Shares in the three months prior to 1 December 2014 cannot be considered
without reservation as the admissible maximum value for the evaluation of the DA
Offer Shares. Rather, the reduction of value per share must be included in the
calculation in this context that may result from a missing dividend entitlement for
2014, if any. As the Bidder states in the Offer Document, that such reduction in value
amounts to EUR 0.78 per share, with the Bidder’s interim group report as per 30
September 2014 having been taken as the basis for the dividend amount to be
expected. Calculating the value of the Bidder’s Share Component on that basis, the
result is a consideration per GAGFAH Share in the amount of a rounded EUR 8.48
(5/14 of the amount per DA Offer Share reduced by EUR 0.78, i.e. EUR 23.75). On
this basis, the value of the consideration offered by the Bidder, taking the Cash
Component into account, amounts to a total of EUR 17.23 per GAGFAH Share and
thus still exceeds the average stock exchange rate of the GAGFAH Share weighted
according to trade volume in the three months prior to 1 December 2014 in the
amount of EUR 14.82. Therefore, the valuation of the DA Offer Shares by the Bidder
is admissible regardless of any unavailable dividend rights for the financial year 2014
according to price requirements under takeover law. The Board of Directors points
out, however, that the Bidder’s current forecast regarding its dividend distribution for
the financial year 2014 seems to be reasonable. This does not mean, though, that the
annual general meeting of the Bidder will actually resolve on a dividend in that
amount. Rather, the dividend payment actually resolved on can be higher or lower,
which – assuming that the dividend rights for the financial year 2014 are unavailable
– can have a corresponding impact on the value of the DA Offer Shares. The Board of
Directors once again points here to the provision of the Business Combination
Agreement described above under Section VII, pursuant to which the GAGFAH
Shareholders shall receive an economic compensation in case that dividend rights of
the DA Offer Shares have no dividend rights for the financial year 2014.
Page 43
2.
Own assessment by the Board of Directors of the adequateness of the
consideration
The Board of Directors deems the consideration offered to be adequate. Apart from
the analysis of the legal minimum requirements, this assessment is based on the
following considerations:
2.1
Premiums compared to historic stock exchange prices
As compared to historic prices of GAGFAH prior to the publication of the decision to
launch the Offer on 1 December 2014, the offered consideration contains a substantial
premium.
· According to the requirements under takeover law for the calculation of the
consideration, the Bidder takes a consideration of EUR 17.51 for each
GAGFAH Share as a basis, comprising EUR 8.75 for the Cash Component
and EUR 8.76 for the Share Component. This includes a premium as
compared to the average stock exchange rate of the GAGFAH Share weighted
according to the trade volume in the three months prior to the publication of
the decision to make the Offer on 1 December 2014 in an amount of EUR 2.69
or 18.2%.
·
Calculating the value of the Share Component on the basis of the Xetra closing
price of the Existing DA Shares on 28 November 2014 (the last trading day
before the announcement of the Offer), the value of the Share Component is
EUR 9.25 and that of the consideration as a whole is approximately
EUR 18.00 for each GAGFAH Share; this means a premium as compared to
the Xetra closing price of the GAGFAH Share on 28 November 2014 (the last
trading day before the announcement of the offer) of EUR 2.49 or approx.
16.1%.7
·
Calculating the value of the Share Component on the basis of the Xetra closing
price of the Existing DA Shares on 18 December 2014, the value of the Share
Component is EUR 9.33 and that of the consideration as a whole is
approximately EUR 18.08 for each GAGFAH Share; this means a premium as
compared to the Xetra closing price of the GAGFAH Share on 28 November
2014 (the last trading day before the announcement of the offer) of EUR 2.58
or approx. 16.6%.8
·
As compared to the highest closing price of the GAGFAH Share in Xetra
trading during the 52-week period prior to the publication of the decision to
make the Offer on 1 December 2014 (EUR 15.77), the consideration contains
o a premium amounting to EUR 1.74 or approx. 11.0%, based on the
average stock exchange rate of the Existing DA Share weighted
according to the trading volume in the three months prior to the
7
Source: Bloomberg
8
Source: Bloomberg
Page 44
publication of the decision to launch the Offer on 1 December 2014 in
the amount of EUR 17.51 per GAGFAH Share;
o a premium amounting to EUR 2.23 or approx. 14.1%, based on the
Xetra closing price of the Existing DA Share on 28 November 2014
amounting to EUR 18.00 per GAGFAH Share; and
o a premium amounting to EUR 2.31 or approx. 14.6%, based on the
Xetra closing price of the Existing DA Share on 18 December 2014
amounting to EUR 18.08 per GAGFAH Share.9
A comparison of the consideration offered by the Bidder calculated on the basis of
various average stock exchange prices of the Existing DA Share weighted according
to volume, in relation to the volume-weighted average stock exchange price of the
GAGFAH Share shows the following premiums:
Timeframe10
Deutsche
Annington
VWAP11 EUR
GAGFAH
VWAP12 EUR
Implied
Consideration
EUR
Premium
25.27
24.53
23.92
23.11
15.15
14.82
13.97
12.97
17.78
17.51
17.29
17.00
17.3%
18.2%
23.8%
31.1%
1 month
3 months
6 months
12 months
2.2
Premiums as compared to price targets of stock analysts
The median of the price targets of stock analysts for the GAGFAH Share prior to the
publication of the decision to make the Offer on 1 December 2014 amounts to EUR
15.85 (source: I/B/E/S). As compared to the median of the price targets, the
consideration includes
· a premium amounting to EUR 1.66 or approx. 10.5%, based on the average
stock exchange price of the Existing DA Share weighted according to the trade
volume in the three months prior to the publication of the decision to launch
the offer on 1 December 2014 in the amount of EUR 17.51 per GAGFAH
Share;
9
Source: Bloomberg
10
Prices of Deutsche Annington and GAGFAH weighted according to volume, each determined on
the basis of Bloomberg data. Volume-weighted average price of the last three months as stated in
the Offer Document, as reported by BaFin to the Bidder on 9 December 2014 (see above)
11
Volume-weighted average price during the relevant period prior to the publication of the decision
to make the Offer on 1 December 2014
12
Volume-weighted average price during the relevant period prior to the publication of the decision
to make the Offer on 1 December 2014
Page 45
· a premium amounting to EUR 2.15 or approx. 13.6%, based on the Xetra
closing price of the Existing DA Share on 28 November 2014 in an amount of
EUR 18.00 per GAGFAH Share;
· a premium amounting to EUR 2.23 or approx. 14.1%, based on the Xetra
closing price of the Existing DA Share on 18 December 2014 in an amount of
EUR 18.08 per GAGFAH Share.
2.3
Premiums compared to the EPRA NAV as per 30 September 2014
Assuming a consideration based on the Xetra closing price of the Existing DA Shares
on 18 December 2014 in an amount of EUR 18.08 per GAGFAH Share, the
consideration contains a premium of EUR 4.16 or approx. 29.9% compared to the
EPRA NAV as per 30 September 2014 in the amount of EUR 13.92 per GAGFAH
Share. Hence, the premium exceeds the corresponding NAV premiums as per 18
December 2014 for Deutsche Annington (23.1%) and LEG Immobilien AG (25.4%)
and is a bit lower than the corresponding NAV premium as per 18 December 2014 for
Deutsche Wohnen AG (32.4%).13
Compared to the EPRA NAV, the consideration, based on the average stock exchange
rate of the Existing DA Shares weighted according to the trade volume in the three
months prior to the publication of the decision to make the Offer on 1 December 2014
amounting to EUR 17.51 for each GAGFAH Share, includes a premium amounting to
EUR 3.59 or approximately 25.8%, or based on the Xetra closing price of the Existing
DA Shares on 28 November 2014 in the amount of EUR 18.00 for each GAGFAH
Share, the consideration contains a premium of EUR 4.08 or approximately 29.3%. 14
In this context, the Board of Directors points out that the EPRA NAV as per 31
December 2014 might be higher than the value as per 30 September 2014, and the
premium based on that value thus might be lower.
2.4
Consideration of GAGFAH’s growth potential
In order to assess the adequateness of the consideration offered by the Bidder, the
Board of Directors further has taken into account the development of GAGFAH’s
business to date and the associated future chances and risks. Against the background
of the positive results that GAGFAH has achieved in the current financial year and the
positive outlook for the years to come, the Board of Directors deems that GAGFAH,
due to its portfolio and its operative strength is best equipped to grow independently
to an extent which is above average also in terms of profitability. However, the Board
of Directors takes the view that the consideration reflects both GAGFAH’s strategic
value and its growth perspectives. Furthermore, the consideration in DA Offer Shares
enables the GAGFAH Shareholders to participate in the increase of value of the
combined Company.
13
Source: NAV premiums calculated on the basis of the respective NAV per share most recently
published (Q3 2014).
14
Source: Bloomberg
Page 46
2.5
Adequateness of the valuation of the Existing DA Shares on the basis of
stock exchange prices
The Board of Directors has not carried out a full evaluation of the Existing DA
Shares. However, it does not see any indications that the stock exchange prices taken
as a basis above under Section VII.2.1 through VII.2.3 of this Statement do not
correctly reflect the value of the Existing DA Shares. The Board of Directors takes the
view that this is also confirmed by the following considerations:
· As per 18 December 2014, the Existing DA Shares were traded at a premium
as compared to the NAV15 of 23.1% and, as per 28 November 2014 (the last
trading day before the announcement of the Offer), of 22.1%. The premium
thus is lower than the NAV premiums of LEG Immobilien AG (25.4%) and
Deutsche Wohnen AG (32.4%).
· As per 28 November 2014 (the last trading day before the announcement of
the Offer), the median of the DA Shares price targets of stock analysts (source:
I/B/E/S) was at EUR 26.25, i.e. 1.4% above the DA Shares price at that date.
As per 18 November 2014, the median of the DA Shares price targets of stock
analysts (source: I/B/E/S) was at EUR 26.90, i.e. 3.0% above the DA Shares
price at that date.
2.6
Fairness Opinions
GAGFAH has engaged Deutsche Bank AG (Deutsche Bank), Merrill Lynch
International Bank Limited, Frankfurt am Main branch (BofA Merrill Lynch), and
Rothschild GmbH (Rothschild) to prepare, independently from each other, Fairness
Opinions on the adequateness of the consideration from a financial perspective.
GAGFAH shall pay remuneration to BofA Merrill Lynch, Deutsche Bank, and
Rothschild for their work as advisors with regard to the Offer; such remuneration shall
be due and payable after submission of the Fairness Opinion and/or upon
consummation or failure of the Offer or withdrawal of the Offer. Moreover,
GAGFAH undertook to reimburse certain expenses and to indemnify the banks and
hold them harmless from and against certain liability risks associated with taking on
this engagement. It is pointed out that BofA Merrill Lynch, Deutsche Bank, and
Rothschild and their respective affiliates – such as set out in the respective Fairness
Opinions – in the past, currently or in the future may have maintained, are
maintaining or will maintain business relationships with GAGFAH, DA or their
affiliated companies that may have been, are or could be remunerated. BofA Merrill
Lynch, Deutsche Bank, and Rothschild and/or their respective affiliates are also active
in securities trading, and they may purchase, hold and sell securities of any type of
GAGFAH, Deutsche Annington or their affiliates for their own account or for the
account of any third party.
BofA Merrill Lynch, Deutsche Bank, and Rothschild submitted their Fairness
Opinions to the Board of Directors on 22 December 2014. In their Fairness Opinions,
BofA Merrill Lynch, Deutsche Bank, and Rothschild each conclude that, subject to
15
EPRA Net Asset Value (NAV) as per 30 September 2014.
Page 47
the assumptions included in the respective Fairness Opinion, the consideration offered
is, as of the submission date of the Fairness Opinion (i.e. 22 December 2014), fair to
the GAGFAH Shareholders from a financial point of view. The Fairness Opinions are
attached to this Statement with their full content as Appendices 3 to 5.
The Board of Directors expressly points out that the Fairness Opinions were provided
solely for the information and assistance of the Board of Directors in connection with
its review of the offer. They are not addressed to third parties and do not create any
third-party rights. In particular, the Fairness Opinions are not adressed to the
GAGFAH Shareholders and do not represent a recommendation by BofA Merrill
Lynch, Deutsche Bank, and Rothschild as to whether or not any GAGFAH
Shareholder should or should not accept the Offer. No contractual relationship is
created between BofA Merrill Lynch, Deutsche Bank, and Rothschild and those who
read the Fairness Opinions. Neither the Fairness Opinions nor the engagement
agreements underlying the Fairness Opinions entered into by GAGFAH and BofA
Merrill Lynch, Deutsche Bank, and Rothschild shall protect or form a basis of reliance
for any third party, or lead to an inclusion of any third party in the scope of protection
with respect to the matters addressed therein. The consent by BofA Merrill Lynch,
Deutsche Bank, and Rothschild to the inclusion of their respective Fairness Opinions
with this Statement as appendices does not represent an expansion or addition to the
group of persons to whom these Fairness Opinions are addressed, or who may rely on
these Fairness Opinions, and also does not lead to an inclusion of third parties in the
respective scope of protection. The Fairness Opinions also do not address the relative
merits and disadvantages of the Offer as compared with other business strategies or
transactions that could be open to the Bidder or to GAGFAH.
For preparing their Fairness Opinions to assess the information on the consideration
contained in the Offer Document, BofA Merrill Lynch, Deutsche Bank, and
Rothschild analysed (i) the Offer Document, (ii) certain publicly available business
and financial information about GAGFAH, DA and the market in which the two
companies are active, as well as (iii) certain reports, financial forecasts and other
analysis published by share analysts dealing with Deutsche Annington and GAGFAH,
and (iv) interviewed the management of GAGFAH.
Furthermore, BofA Merrill Lynch, Deutsche Bank, and Rothschild , independently
from each other, performed certain analyses, which have been undertaken in
comparable capital market transactions and that appeared appropriate, in order to
provide with the Board of Directors a sound basis for an assessment of the amount of
the offered consideration from a financial point of view.
The Board of Directors points out that the Fairness Opinions provided by BofA
Merrill Lynch, Deutsche Bank, and Rothschild are subject to certain assumptions and
qualifications and that, in order to understand the Fairness Opinions, they must be
read in their entirety. The Fairness Opinions of BofA Merrill Lynch, Deutsche Bank,
and Rothschild are based on the general economic conditions and the market
conditions as per the date of submission of the respective Fairness Opinion.
Subsequent developments could have effects on the assumptions made when
preparing the respective Fairness Opinion and on their results. BofA Merrill Lynch,
Deutsche Bank, and Rothschild are under no obligation to update or again confirm
Page 48
their respective Fairness Opinions with regard to any events occurring after the
submission date of the respective Fairness Opinion.
The Fairness Opinions of BofA Merrill Lynch, Deutsche Bank, and Rothschild are not
based on a company valuation, such as usually carried out by certified public
accountants in accordance with the requirements of German corporate law, and BofA
Merrill Lynch, Deutsche Bank, and Rothschild in particular did not prepare a
valuation opinion (Wertgutachten) on the basis of the guidelines published by the
Deutsches Institut für Wirtschaftsprüfung (IDW) (IDW S1); neither do the respective
Fairness Opinions follow the standards for the preparation of Fairness Opinions (IDW
S8). A Fairness Opinion of the kind as submitted by BofA Merrill Lynch, Deutsche
Bank, and Rothschild differs in a number of important respects from a valuation
opinion performed by qualified auditors.
The Board of Directors points out that it did not carry out a company valuation of
GAGFAH on the basis of IDW S1, either.
2.7
Overall assessment
The Board of Directors has thoroughly occupied itself with the adequateness of the
consideration offered by the Bidder. In this context, the Board of Directors in
particular dealt with the Fairness Opinions of BofA Merrill Lynch, Deutsche Bank,
and Rothschild, intensively discussed their results with representatives of those
companies in its meeting of 22 December 2014, and conducted its own critical review
of those results. On that basis, the Board of Directors considers the consideration
offered by the Bidder to be adequate. The Board of Directors’ assessment is based on
the assumption that the DA Offer Shares can be issued with a dividend right for the
financial year 2014. The Board of Directors currently cannot make any statements
regarding the scenario that the GAGFAH Shareholders are granted compensation for a
missing dividend right for the financial year 2014 in accordance with the provisions of
the Business Combination Agreement, as it first would have to examine the details of
such compensation.
VIII. Objectives and intentions of the Bidder and prospective consequences for
GAGFAH
1.
The objectives and intentions according to the Business Combination
Agreement
The negotiations between GAGFAH and DA on the conclusion of the Business
Combination Agreement were conducted with a view as to how the Offer could be
structured in the interest of both companies, their shareholders, employees, and
customers and taking these interests into consideration, how the integration of the two
companies could take place. Accordingly, the conclusion of the Business
Combination Agreement was based on the common understanding of the Bidder and
the Target that the combination of GAGFAH and DA should take place in a
constructive dialogue and taking the interests of either company into a balanced
account. The Merger aims at the creation of a competitive undertaking using the
respective strengths of both companies, the attainment of the greatest possible value
creation, and the utilisation of synergies effects.
Page 49
Dr. Wulf Bernotat, the Chairman of DA’s supervisory board, and Mr. Gerhard Zeiler,
the Chairman of GAGFAH’s Board of Directors (the Guarantors) will monitor
compliance with the Business Combination Agreement. The Guarantors shall exercise
this task as third parties and not in their respective positions as members of corporate
bodies of DA and GAGFAH. Each Guarantor shall be entitled and authorised for the
term of the Business Combination Agreement, independently from DA and
GAGFAH, to assert in their own right at any time the fulfilment of the contractual
obligations by DA and GAGFAH and, if required, to enforce this before the
arbitration court which is competent according to the Business Combination
Agreement.
Against this background, essentially the following was agreed in the Business
Combination Agreement:
1.1
Name; registered office; future strategy and structure
DA and GAGFAH will agree on a new company name for the Combined Company
resulting from the Merger. The registered office of the company after the merger shall
be set up within a radius of 20 kilometres around the urban area of the city of Essen.
With respect to the future strategy and structure, DA and GAGFAH have set out in
the Business Combination Agreement that they are conducting their businesses
according to similar operative business models, which are each focused on the longterm management of their real estate portfolios. The combined group of companies
resulting from the Merger will continue to pursue its previous growth strategy by
using the synergies.
The group resulting from the Merger will be geographically divided into six regions.
Three of these regions will be headed by individuals from DA’s management and the
other three will be headed by individuals from the management of GAGFAH.
1.2
Board composition at DA and GAGFAH
The provisions of the Business Combination Agreement regarding the future
composition of the boards of the Bidder and the Target are based on the principle that
representatives of either side shall serve in bodies of the respective other party after
consummation of the Offer.
a)
GAGFAH’s Board of Directors
The composition of the Board of Directors of GAGFAH falls within the area of
responsibility of GAGFAH’s general meeting. In the Business Combination
Agreement, DA and GAGFAH have agreed that the members of DA’s management
board shall be appointed to the Board of Directors of GAGFAH and that - subject to a
resolution of GAGFAH’s Board of Directors (which has approved the conclusion of
the Business Combination Agreement), the approval of GAGFAH’s general meeting,
the articles of association and the applicable provisions of Luxembourg law - the
Board of Directors shall be composed as follows:
Page 50
· Rolf Buch, Member of the Board of Directors;
· Thomas Zinnöcker, Member of the Board of Directors;
· Stefan Kirsten, Member of the Board of Directors;
· Klaus Freiberg, Member of the Board of Directors;
· Gerald Klinck, Member of the Board of Directors;
· Dieter H. Ristau, Member of the Board of Directors; and
· Yves Wagner, Member of the Board of Directors.
DA shall be entitled to appoint a further independent member as the chairman of the
Board of Directors. GAGFAH shall be entitled to appoint a further independent
member as the vice chairman. Following the exercise of the appointment rights, two
members of the Board of Directors will resign from their offices, if required.
b)
The management board of DA
Mr. Thomas Zinnöcker shall be appointed as vice chairman with responsibilities for
sales, acquisitions and integration, and Mr. Gerald Klinck as chief controlling officer
to DA’s management board (in this respect cf. Section X of this Statement).
c)
Composition of DA’s supervisory board
The size of the supervisory board of DA shall be increased to twelve shareholder
representatives. DA and GAGFAH shall work to ensure that Mr. Gerhard Zeiler
(current chairman of GAGFAH’s Board of Directors), Mr. Hendrik Jellema (coopted
member of GAGFAH’s Board of Directors as of 1 January 2015) and Mr. Daniel Just
(coopted member of GAGFAH’s Board of Directors as of 1 January 2015) are
appointed as new members of the expanded supervisory board.
1.3
Management of essential subsidiaries; distribution and acquisition
The management of the following companies shall be set up as follows according to
the Business Combination Agreement:
· Deutsche TGS GmbH: Chairman: DA; one or two further members to be
appointed by GAGFAH
· Management of the homeowner’s association administration
Verwaltung): one member from DA and GAGFAH, respectively
(WEG
· Infrastructural facility management unit: one member from DA and
GAGFAH, respectively
· The management of GAGFAH Holding GmbH and GAGFAH GmbH shall be
identical with the management board of DA.
Page 51
The distribution units will be combined in the Merger of DA and GAGFAH, and
managed by someone designated by DA or by GAGFAH. Similarly, the acquisitions
units will be combined and managed by someone designated by DA or by GAGFAH.
Should the acquisitions unit be managed by someone designated from DA, then,
conversely, the distribution unit will be managed by someone designated by
GAGFAH and vice versa.
1.4
Employees
DA and GAGFAH agree that the committed and motivated workforce of the
companies belonging to the new Group are the basis for the current and future success
of the Group. DA and GAGFAH seek constructive dialogue with their employees and
their representatives to develop attractive and competitive working conditions in order
to maintain an excellent employee base.
DA and GAGFAH will respect the statutory rights of employees, works councils and
unions, especially regarding legal provisions for employee participation in
supervisory boards and participation rights under the WpÜG, as well as agreements
under collective bargaining law (shop agreements and collective labour agreements).
The provisions from the social charter or sales contracts existing in the individual
companies of the GAGFAH Group shall remain valid for their term.
DA and GAGFAH consider in particular collective bargaining agreements as
appropriate instruments for the achievement of effective employees' participation in
the regulation standardisation and finding of adequate working conditions. It is not
intended, subject to the structural and integration measures agreed upon in the
Business Combination Agreement as well as the objectives of the Combined
Company, to terminate material agreements under collective bargaining law (shop
agreements and collective labour agreements) in connection with the implementation
of the Merger.
Dismissals due to operation redundancies are to be avoided through placement in the
group’s internal job market and through skills development. Where necessary, a
reconciliation of interests and a social plan will be negotiated with the required
participation of the works councils pursuant to applicable law.
The selection of managers/executives that may be required due to a duplication of
roles in the combined entity shall be carried out in a “best-in-class” audit. The
Integration Committee (as defined below) will be responsible for decisions on this
subject and in doing so will seek advice from external consultants, especially as
regards to the principles of the selection process (content wise as well as with respect
to the process). Managers and executives leaving the company in connection with this
audit shall be entitled to, on the basis of individual agreements, (i) continued
employment on the existing conditions of employment for at least six months and (ii)
at least two annual salaries as a severance payment (one annual salary shall be
equivalent to twelve monthly salary instalments, an annual bonus for achieving 100%
of the target, and share options granted in the previous year under the “Long Term
Incentive Programme” existing at GAGFAH, if applicable).
Page 52
1.5
Integration
a)
Integration Committee
DA and GAGFAH shall establish a joint integration committee (Integration
Committee). It is to coordinate the integration of the business units of DA and
GAGFAH, taking the principles established in the Business Combination Agreement
into account. The Integration Committee will be composed of Mr. Thomas Zinnöcker
and Mr. Rolf Buch. As a general rule, the Integration Committee shall decide based
on mutual agreement. If an agreement is reached, the Integration Committee will
work towards implementing the decision (by the relevant corporate bodies, where
applicable).
b)
Integration plan
DA and GAGFAH furthermore agreed to initiate an integration project, the
conception stage of which is to be completed by the end of 2015. On the basis of
significant business processes, subprojects will be defined which will be jointly
managed by an employee of each DA and GAGFAH. The aim is to analyse the
respective processes, operations and organisational structures of both companies,
leading to a mutual solution, taking into account the joint goal to create synergies and
improve efficiency. The housing industry-related processes of DA will be continued
by the Combined Company.
After the conception stage has been completed, the prerequisites for the realisation of
the identified synergies and efficiency improvements shall largely be created during a
six-month implementation stage and the processes, operations and organisational
structures shall be adjusted accordingly.
Should the Integration Committee not come to an agreement on any measure, such
measure shall be submitted to the Guarantors for decision. If the Guarantors do not
come to an agreement, the measure shall not be carried out, or the position in question
shall be double-staffed with one person appointed by DA and one person appointed by
GAGFAH.
1.6
Implementation
The Board of Directors points out that to some extent the provisions of the Business
Combination Agreement (such as the envisaged board compositions) require further
implementation steps and that insofar compliance with the Parties’ relevant
undertakings is subject to the adoption of corresponding resolutions by the competent
bodies.
Page 53
2.
Objectives and intentions in the Offer Document
2.1
Economic and strategic background; potential synergies from the
Bidder’s point of view
In Section 7 of the Offer Document, the Bidder further sets out the strategic and
economic background of the Offer.
The takeover of GAGFAH should, in a first step lead to an assumption of control over
the Target by DA with the effect that GAGFAH will become an affiliate of DA to be
included in DA’s consolidated financial statements. In a second step, DA intends to
exert influence on the composition of GAGFAH’s Board of Directors through its
majority in the general meeting. In a third step, it will be examined as to whether
GAGFAH should be merged into DA. All of these steps will in the following be
referred to as the Merger; moreover, the DA Group together with the GAGFAH
Group will be referred to as the Combined Company.
The business strategy of DA, according to the Offer Document, centres on
strengthening and expanding its position as the leading German residential real estate
company.
As the Bidder states under Section 7.1 of the Offer Document, the goal of the Merger
is the realisation of economies of scale of the largest German real estate companies
with a nationwide residential portfolio of over 325,000 residential units (as of 30
September 2014) and a complementary portfolio customisation of both companies.
Based on a common IT platform and standardised processes, the Bidder’s
management board believes economies of scale can be achieved, especially in the
areas of property management (including purchasing), portfolio management,
services, and financing. The Bidder assumes that cost advantages for the Combined
Company in an aggregate amount of approximately EUR 84m. Such potential for
synergies is explained in more detail in Sections 7.1.2 through 7.1.4 of the Offer
Document and can be summarised as follows:
· Operational synergies: Approximately EUR 47m of the synergies assumed by
the Bidder relate to the operational area and can originate from (i) a further
development of the craftsmen’s organisation and the establishment of a joint
management organisation, (ii) the establishment of a shared services centre of
GAGFAH and DA, (iii) the establishment of a purchase cooperation of DA
and GAGFAH, (iv) the extension of DA’s multimedia business to GAGFAH,
(v) synergies due to optimised, work-sharing local management, as well as (vi)
IT synergies.
· Financial synergies: Approximately EUR 37m of the synergies assumed by the
Bidder relate to the area of financing. Such synergies can originate from (i) a
reduction of the interest expenditure through refinancing and an expected
upgrade of the rating to BBB+ by Standard & Poor‘s, as well as (ii) a
strengthened capital market profile of the Combined Company.
Page 54
With regard to the strengthened capital market profile of the Combined Company,
the Bidder further sets out that the DA Share will be more attractive to investors
due to its increased importance and liquidity. This should also ensure financing
through equity and/or debt on more favourable terms. For instance, the Bidder
considers that there is a possibility that a better rating agency assessment would
result from the improved operational profile of the Combined Company. In
addition, the partial share exchange offer might also provide DA with access to
new groups of investors. Besides, from DA’s perspective there may in case of an
increased liquidity of the DA Share the possibility of an admission to the DAX 30
indice.
The one-off expenses related to the realisation of scale effects are estimated by DA
to be approximately EUR 310m, out of which approximately EUR 80m relate to
the achievement of operative synergies and up to approximately EUR 230m relate
to prematurity compensations and refinancing costs.
Under Section 7.15 of the Offer Document, the Bidder also sets out that the
expected economic consequences and advantages of the transaction possibly will
result in additional potentials for improvement of value for the shareholders of DA
and for former GAGFAH shareholders, which are difficult to quantify at this stage.
Because of the size of the Combined Company, its market position, the expected
synergies, the improved access to capital markets and other factors, DA believes
that the overall risk profile would improve significantly. Such improvement could
lead to a new valuation of DA’s relevant profit, cash flow and dividend streams on
the capital market in the medium term and consequently to a new valuation of its
shares. Any such reevaluation would represent a significant potential for
improvement of value for all current DA and GAGFAH Shareholders.
The Bidder assumes that cost savings will give rise to a positive effect on the
FFO116 of the Combined Company in an amount of approximately EUR 84m
before tax. The Bidder anticipates that the synergies may be realised within
approximately 24 months after consummation of the transaction.
16
FFO1 is defined under Section 7.1.2 of the Offer Document as an indicator derived from FFO
(funds from operations). In order to determine the FFO 1, the Adjusted EBITDA for the respective
periods is adjusted for operating income from sales activities, net interest expenses excluding
special items and current income taxes. Adjusted EBITDA means the earnings before interest,
taxes, depreciation and amortisation, including income from other investments, adjusted for the
non-recurring result and for net income from fair value adjustments of investment and inventory
properties (effects). The non-recurring result comprises effects considered by the company to be
unusual or infrequent effects which have an impact on the result, such as project costs for the
further development of business.
Page 55
2.2
Intentions of the Bidder regarding the future business activities of the
Target and the Bidder
a)
Future business operations of the Target and the Bidder, use of assets and
future obligations of the Target and the Bidder
According to Section 8.1 of the Offer Document, the Bidder intends to ensure a close
cooperation within the Combined Company by way of far-reaching cooperation
agreements in case the Offer is implemented successfully. The aim is to integrate the
residential portfolios and operational procedures of DA and GAGFAH, to the highest
degree possible, and to organise them according to joint “best-in-class” criteria.
The Bidder intends to continue to manage the joint residential portfolios of DA and of
GAGFAH in a sustainable and responsible manner. According to the Offer Document,
DA has no further intentions regarding the use of the remaining assets of GAGFAH
and, as far as DA is affected by the Takeover Offer, DA’s own assets according to the
Offer Document. Furthermore, the Bidder will ensure, to the extent legally
permissible, that the companies of the GAGFAH Group fulfil their existing social
obligations, in particular with respect to the German Pension Insurance Association
(Deutsche Rentenversicherung Bund), the state capital of Dresden, and the BEV
(Bundeseisenbahnvermögen).
In addition, the Bidder sets out under Section 8.1 of the Offer Document that it would
refinance GAGFAH Group if – such as described in more detail under Section 8.1 of
the Offer Document – a corresponding need for refinancing would arise due to the
consummation of the Offer (e.g. the exercise of change-of-control-related
extraordinary termination rights). According to the Offer Document, the Bidder under
the DA Credit Agreement has at its disposal Facility A for the fulfilment of all
payment obligations resulting from or in connection with the Offer and, in addition, a
Facility B in the amount of EUR 4.5 billion.
b)
Reference to the Business Combination Agreement
In connection with the description of its intentions under Section 8 of the Offer
Document, the Bidder further makes reference to the intentions and obligations set
forth in the Business Combination Agreement, summarising them with regard to (i)
the impact on the members of the Board of Directors of the Target and the members
of the management board and the supervisory board of the Bidder (Section 8.2 of the
Offer Document), (ii) employees, conditions of employment and employee
representatives of the Target and the Bidder (Section 8.3 of the Offer Document), and
(iii) the company name and the seat of the Target and the Bidder, the location of
major parts of the business (Section 8.4 of the Offer Document). Insofar, reference is
made to the corresponding content of the Business Combination Agreement as
described under Section VIII.1 of this Statement.
The Bidder further explains under Section 8.4 of the Offer Document that it does not
intend to take measures in the near future that would lead to the termination and/or
closure of essential sites (i.e. sites at which after the completion of the publication of
the Offer Document at least 50 employees are employed). The Bidder has the
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intention, however, to discuss with GAGFAH the merging of sites which are located
close to each other.
c)
Merger of GAGFAH to DA
As set out in more detail under Section 8.5 of the Offer Document, the Bidder
considers to merge GAGFAH into DA by way of a cross-border merger if, through
the acceptance of the Offer, DA receives the necessary majority in GAGFAH.
According to the Offer Document, except for the intentions and provisions described
in Section 8 of the Offer Document, the Bidder has not provided any further intentions
and provisions in relation to future business activity, the domicile and location of
essential parts of the business, the use of assets, future obligations, employees and
their representatives, members of the executive bodies and material changes to the
conditions of employment of both the Target and - to the extent affected by the Offer the Bidder.
3.
Assessment of the objectives and intentions of the Bidder and the
prospective consequences
The Board of Directors welcomes that the conclusion of the Business Combination
Agreement has formed a legal basis for the combination of DA and GAGFAH, taking
the interests of both companies into a balanced account. According to the view of the
Board of Directors, the Business Combination Agreement and the objectives and
intentions of the Bidder set out in the Offer Document provide a good framework
conditions for a successful implementation of the transaction in the interest of the
shareholders, employees, and customers of GAGFAH Group.
3.1
Economic reasons and strategy; synergy potentials
The Board of Directors welcomes the Bidder’s intention to continue to manage the
joint residential portfolios of DA and GAGFAH in a sustainable and responsible
manner, which corresponds to the existing business model of GAGFAH. It is the view
of the Board of Directors that it will also be of importance in this connection that,
apart from a successful integration, the current investment plans of GAGFAH will
continued to be implemented after the Merger essentially in accordance with the
current planning.
The Board of Directors also welcomes that the Bidder will ensure, to the extent
legally permissible, that the companies of the GAGFAH Group fulfil their existing
social obligations, particularly with respect to the German Pension Insurance
Association (Deutsche Rentenversicherung Bund), the state capital of Dresden, and
the BEV (Bundeseisenbahnvermögen).
The Board of Directors looks favourably at the Bidder’s assumption that cost savings
will give rise to a positive effect on the FFO1 of the Combined Company in an
amount of approximately EUR 84m before tax. The Board of Directors could not
examine in detail the Bidder’s analysis of potential synergies on the basis of the
information available to it. Principally, the Board of Directors shares the view that the
topics the Bidder addresses in the Offer Document are suitable for the realisation of
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synergies. As, however, the Board of Directors today cannot make any statements
regarding the Combined Company, future synergies can be assessed essentially only
considering GAGFAH’s own situation. However, the Board of Directors takes the
view that the synergies can basically be realised within the scope and timeframe that
the Bidder expects and aims at, with the following qualifications:
· The Board of Directors deems that the Bidder’s assumptions on the realisation
of operational synergies are based on a significant depth and width of the
Combined Company’s own performance capabilities. This own performance
strategy comprises a significant potential for synergies, also according to the
assessment of the Board of Directors. On the other hand, risks that can not be
fully utilized might be increased and, at the same time, the flexibility of the
Combined Company to respond to changes in the market environment or the
legal framework conditions could be restricted, which in the final analysis
would also lead to risks for the realisation of synergy potentials.
· There is a possibility that the financial synergies may not be realised to the
extent the Bidder aims at within the envisaged period, i.e. within
approximately 24 months after the consummation of the transaction. This is
mainly due to the fact that in case of a short term redemption of the existing
Commercial Mortgage Backed Securities (CMBS) financing of the GAGFAH
Group in connection with the refinancing, higher prematurity compensations
could be incurred, which might exceed the amounts assumed by DA
(depending on the exact dates). In case of redemption at a later point of time,
the prematurity compensations might be lower.
· The Board of Directors for the time being cannot assess the development of
the cost structure of the Combined Company in the time following the
consummation of the transaction. This, too, can mean that the potentials for
synergy cannot be realised to the extent as anticipated by the Bidder.
The Board of Directors points out that it cannot be predicted with certainty whether or
not the synergy potentials actually can be achieved to the extent and in accordance
within the time schedule assumed by the Bidder. The Board of Directors considers it
positive that, at the level of the Integration Committee and by way of the joint
integration project, there is the possibility to further examine synergy potentials and to
develop options for the realisation of the existing potential to the best possible extent.
The Board of Directors shares the Bidder’s assessment that the Combined Company
will have possibilities for an improved borrowing of debt capital at favourable
interests due to a strengthened capital market profile.
Likewise, both the Board of Directors and the Bidder proceed from the assumption
that the share of the Combined Group of Companies will be more visible on the
capital market after the Merger and attractive to a broader base of investors. The
Board of Directors shares the Bidder’s assessment that, due to the improved
operational profile of the Combined Company, there are prospects for an improved
evaluation by rating agencies. The Board of Directors welcomes the potential
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perspective that the share of the Combined Company might be included in the DAX
30.
The Board of Directors considers it to be positive that the Bidder intends to ensure a
close cooperation within the Combined Company. The Board of Directors welcomes
that the residential portfolios and operational procedures of DA and GAGFAH shall
be integrated to the farest extent possible and be organised according to joint “best-inclass” criteria. The Board of Directors deems that this “best-in-class” approach is
suitable to preserve the respective strengths of GAGFAH and the Bidder and to
transfer them to the Combined Company.
3.2
Future business operations of GAGFAH and the Bidder; use of assets and
future obligations of GAGFAH and the Bidder
The Board of Directors takes note of the fact that GAGFAH would become a
subsidiary of DA and thus part of the DA Group of companies if the Offer is
successfully implemented.
The Board of Directors deems it to be of crucial importance that the integration of
GAGFAH in the DA Group, in accordance with the understanding forming the basis
of the Business Combination Agreement, is implemented on the basis of a
constructive dialogue and taking into a balanced account the interests of DA and
GAGFAH in order to create a competitive undertaking with as much of a value
creating potential as possible and to make use of synergy effects on the basis of the
respective strengths of both companies. Against this background, the Board of
Directors welcomes that DA and GAGFAH have come to an understanding regarding
the establishment of the Integration Committee, at the level of which the two
companies are represented by Mr. Buch and Mr. Zinnöcker, respectively. The Board
of Directors furthermore looks favourably at the fact that provisions were included in
the Business Combination Agreement for the initiation and implementation of a joint
integration project and that the joint management by one member of each DA and
GAGFAH has been provided in particular for the partial projects during the
conception stage, which are to be completed by the end of 2015.
The Board of Directors makes clear that, after consummation of the Offer, it will
continue to take reasonable account in its decisions of the interests of any remaining
GAGFAH minority shareholders, in particular with regard to such measures that
relate to the integration of GAGFAH into the DA Group.
3.3
Name and registered office of the Target and the Bidder; location of
major parts of the business
The Board of Directors welcomes that the future company name will be selected in
mutual consent and that the registered office of the Combined Company will be
established after the Merger within a radius of approx. 20 kilometres around the urban
area of the city of Essen.
The Board of Directors considers it positive that the Bidder does not intend to take
measures in the near future that would result in the termination and/or closing down
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of essential sites. The Board of Directors takes note of the Bidder’s intention to
discuss with GAGFAH the merging of nearby locations.
3.4
Composition of boards
The Board of Directors considers it to be positive that it is intended that the present
members of the DA management board will become members of the GAGFAH Board
of Directors and that representatives of GAGFAH will be appointed as members of
the DA management board and supervisory board. In particular the envisaged
appointment of Mr. Zinnöcker and Mr. Klinck as members of the DA management
board is viewed favourably by the Board of Directors because Mr. Zinnöcker and Mr.
Klinck on the basis of their long-standing experience and outstanding knowledge on
GAGFAH are especially suited, as members of the executive management of the
Combined Company, to shape the integration of GAGFAH and DA to a decisive
degree and to work towards implementing the strengths of GAGFAH in the
Combined Company to the best possible extent.
Overall, the Board of Directors considers the intended mutual appointment of
members of the DA and GAGFAH boards as welcome evidence of the Bidder’s and
the Target Company’s common wish to shape the Merger in the interest of both
companies, their shareholders, employees and customers.
3.5
Merger of GAGFAH into DA
The Board of Directors takes note that the Bidder is considering a cross-border merger
of GAGFAH into DA. In the opinion of the Board of Directors, such plans should be
implemented within the scope of an overall concept, in particular, taking tax aspects
into due consideration.
3.6
Financial consequences for GAGFAH
a)
Financing of GAGFAH; Convertible Bond 2014
The Board of Directors points out that it cannot be ruled out that, following a Change
of Control, holders of the Convertible Bond 2014 demand a repayment of the
principal amount and the interest accrued on the Convertible Bonds 2014 held by
them. The aggregate principal amount of all Convertible Bonds 2014 amounts to EUR
375 million, which might result in refinancing requirements of up to around EUR
377,020,030 - including interest accrued.
Furthermore, it is possible that the execution of the Offer may cause the termination
of a Working Capital Facility, which is relevant to GAGFAH’s current liquidity
situation, in an amount of EUR 25 million. This would then have to be accordingly
considered within the scope of the ongoing liquidity planning.
In the opinion of the Board of Directors, it is important that the Bidder, by taking
appropriate measures, guarantees a solid and safe financing of the GAGFAH Group
also after completion of the Offer. Therefore, the Board of Directors appreciates the
Bidder’s intention, according to the Offer Document, to refinance the GAGFAH
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Group - if and to the extent required - and the availability of funds to the Bidder under
the DA Credit Agreement for this purpose as described in the Offer Document.
b)
Tax consequences
(1)
Real estate transfer tax
The consummation of the Offer can, in principle, trigger real estate transfer tax
provided an acquiror thereby acquires, either directly or indirectly, 95% in GAGFAH.
The Board of Directors understands the offer structure envisaged by the Bidder to
mean that DA, due to the participation of the Third-Party Bank, will not achieve the
95% threshold for a participation in GAGFAH and that the consummation of the
Offer, therefore, will not directly trigger any real estate transfer tax.
Furthermore, the consummation of the Offer may trigger real estate transfer tax, if to
the ownership of the partner structure of a partnership indirectly held by GAGFAH is
changed by the consummation of the Offer within a five-year period at least 95%. The
party liable to pay tax would then be the respective partnership. The partnerships
(indirectly) held by GAGFAH are largely structured in a way that the completion of
the Offer will not result in any indirect change of the ownership structure in the
partnerships holding real estate. However, it is possible that real estate transfer tax is
triggered within the scope of a partial portfolio if the tax administration should not
follow the relevant rulings of the Bundesfinanzhof (Federal Fiscal Court) or if the
applicable law should be modified in accordance with a resolution made by the
German Bundesrat (Upper House of the German Parliament).
The real estate transfer tax burden may have the consequence that the distributable
profit of the GAGFAH Group is reduced.
(2)
Tax loss carry-forwards
The Board of Directors points out that the completion of the Offer is likely to have
adverse impacts on the tax loss carry-forwards of the GAGFAH Group. At GAGFAH
Group, as of 31 December 2013 deferred taxes on corporate income tax loss carryforwards were set up as assets in the amount of approx. EUR 171.4 million and trade
tax loss carry-forwards were set up as assets in the amount of approx. EUR 66.6
million. No deferred taxes were set up for interest carry-forwards. Upon completion
of the Offer, the loss and interest carry-forwards will be partially lost due to
applicable tax laws; tax loss and interest carry-forwards will, however, not be lost, if
and to the extent they are covered by taxable hidden reserves. The loss of tax loss
carry-forwards may, in the future, result in an additional burden on GAGFAH Group
as well as in a reduction of the distributable profit.
(3)
Deductibility of interest expenses
Within the scope of their business activities, the companies of the GAGFAH Group
have entered into numerous financing arrangements with third parties, e.g. for the
acquisition of real estate portfolios. Interest payments and repayments of the principal
amount will have to be made for this debt financing. The tax deductibility of interest
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on debt may be limited by the so-called “Interest Barrier” (Zinsschranke). Due to the
Interest Barrier, the deductibility of net interest expenses of a business is generally
limited to 30% of the taxable EBITDA (taxable income less interest payable and
certain depreciations) unless certain exceptions such as the “Escape clause” are
applicable. Any non-deductible amount may only be carried forward to future periods
and may be deductible in future years under certain circumstances.
As a result of the completion of the Offer, the GAGFAH Group will become part of
the DA Group for purposes of the Interest Barrier. The parameters relevant for the
deductibility of the interest expenses in accordance with the “Escape clause”, in
particular the equity ratio as well as a potential relevant shareholder debt financing
will then refer to the DA Group as a whole. It is possible that following completion of
the Takeover Offer the “Escape clause” will be inapplicable with the consequence that
part of the interest expenses will not be tax-deductible.
Any increase in the non-deductible interest expenses may have the consequence that
the tax burden of the GAGFAH Group will increase and the distributable profit will
decrease.
3.7
Consequences on existing business relationships of the GAGFAH Group
The Board of Directors does currently not assume that the consummation of the Offer
and a Change of Control potentially arising therefrom with regard to the GAGFAH
Group will lead to a termination of any material business relationships by the
respective contractual partners of the GAGFAH Group.
4.
Possible consequences for employees and employee representation in the
GAGFAH Group as well as employment conditions
The completion of the Offer will have no direct impact on the employment contracts
and employment conditions of the employees of the GAGFAH Group. The
employment relationships will be continued by the same employer. There will be no
transfer of business. The contents of the employment contracts will remain unaffected.
The Board of Directors assumes that the completion of the Offer will have no impact
on the validity of collective agreements and works agreements.
The Board of Directors also assumes that the completion of the Offer will not have an
impact on currently existing employee representations, in particular the works
councils existing in companies and establishments of the GAGFAH Group. To the
extent employee representatives have been elected as members of supervisory boards
of GAGFAH companies by virtue of applicable rights of co-determination, such
members will remain in office following completion of the Offer.
The Board of Directors appreciates that the Bidder confirmed in the Business
Combination Agreement that the committed and motivated staff members of DA and
GAGFAH form the basis of the current and future success of the joint undertaking.
Moreover, the Board of Directors considers it essential that, as laid down in the
Business Combination Agreement, DA and GAGFAH respect the statutory rights of
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employees, works councils and trade unions, in particular statutory provisions on
employees’ co-determination on supervisory boards, as well as collective agreements.
Furthermore, the Board of Directors appreciates that the Business Combination
Agreement expressly recognised collective agreements as especially suitable tools for
implementing effective employees’ participation in the regulation standardisation and
finding of adequate working conditions and that existing collective agreements are, in
principle, intended to be maintained.
The Board of Directors notes that following completion of the Offer it is intended to
take structural measures and/or integration measures which may also affect the
employment relationships and employment conditions. However, the Board of
Directors deems it positive that such measures will be worked out by an Integration
Committee jointly set up by DA and GAGFAH. Furthermore, it appreciates the
intention to prevent dismissals for operational reasons to the largest extent possible by
placing other jobs in the group’s internal job market and by skills development and to
discuss potential action, if required, in negotiations on a reconciliation of interests and
a social plan. The Board of Directors also considers it to be of key importance that as also stated by the Bidder in Section 8.3 of the Offer Document - existing rules on
the protection of employees under the social charter or sales contracts shall remain
valid for their respective duration.
The “best in class” selection process provided by the Bidder for the selection of
executives and managers in the event that a position is double-staffed is deemed by
the Board of Directors to be the appropriate approach, in particular when considering
the envisaged social protection of executives and managers leaving as a result of such
selection process.
At present, key executives of the GAGFAH Group (except for the members of the
senior management) have special rights of termination under their employment
contracts in case of a Change of Control. In order to avoid the exercise of such special
rights of termination directly after the Change of Control and to ensure that the
present management essentially continues its work at least until the next ordinary
general meeting of GAGFAH, the Board of Directors, at its meeting of 22 December
2014, resolved to use its influence to work towards that these executives are offered
an adjustment of the time period during which the special right of termination in case
of a Change of Control can be exercised to the effect that such right can be exercised
only after the next ordinary general meeting of GAGFAH. The Board of Directors
requested Mr. Zinnöcker to endeavour to implement this resolution. The
implementation of this resolution is still, inter alia, subject to board resolutions of the
relevant employer company as well as to the approval of the executive concerned,
among other requirements.
IX.
Consequences for GAGFAH shareholders
The following statements serve to assist the GAGFAH shareholders in their
assessment of the consequences of an acceptance or non-acceptance of the Offer. The
aspects mentioned are not exhaustive. Every GAGFAH shareholder is solely
responsible for making its own evaluation of the consequences of an acceptance or
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non-acceptance of the Offer. The Board of Directors recommends to the GAGFAH
shareholders to seek expert advice in this context, if required.
The Board of Directors further points out that it will not give any assessment as to
whether GAGFAH shareholders, as a result of the acceptance or non-acceptance of
the Offer, may potentially suffer any tax disadvantages (in particular a potential tax
liability for capital gains) or forfeit tax advantages. The Board of Directors
recommends to the GAGFAH shareholders to obtain tax advice before making a
decision on the acceptance or non-acceptance of the Offer which considers their
respective individual situation.
1.
Potential disadvantages in case the Offer is accepted
GAGFAH shareholders accepting the Offer will lose their membership and property
rights in GAGFAH upon completion of the Offer with the transfer of their GAGFAH
Shares to the Bidder and will receive as a consideration a fixed number of DA Offer
Shares in addition to a Cash Component. They should, therefore, take into account the
risks relating to the DA Offer Shares described in the Offer Document as well as, in
particular, the following aspects:
· GAGFAH shareholders accepting the Offer will no longer directly benefit
from a potential favourable development of the stock exchange price of the
GAGFAH Share or a potential positive development of the business of the
GAGFAH Group.
· The Bidder intends, if and to the extent permitted by law and assuming that the
Offer will be consummated in March 2015 (as provided in Section 12.5 of the
Offer Document), to issue the DA Offer Shares with entitlement to dividends
for the financial year 2014. It is, however, unclear whether the DA Offer
Shares will eventually be issued with entitlement to dividends for the financial
year 2014 will be finally feasible. As to the possible consequences of a
potentially missing entitlement to dividends for the financial year 2014 and the
provision stipulated for this case in the Business Combination Agreement,
reference is made to Section VII of this Statement.
· GAGFAH shareholders accepting the Offer will bear, in case the Offer is
executed, the risk that the stock exchange price or the business activities of
DA or the DA Group may develop unfavourably. It is in particular possible
that the synergy effects expected by DA will not or not to a full extent be
achieved. With regard to potential risks that may be involved in the acquisition
of the DA Offer Shares, reference is in particular made to the Bidder’s
information provided in Annex 4 of the Offer Document (information pursuant
to section 2 no. 2 of the WpÜG-AngebotsVO in conjunction with section 7 of
the German Securities Prospectus Act and the EU Prospectus Regulation).
· The completion of the Offer and the acquisition of the DA Offer Shares by the
GAGFAH shareholders as well as the payment of the Cash Component will
not take place before all Closing Conditions have been met or the Bidder, if
and to the extent possible, has waived their fullfillment. Whether the Closing
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Condition regarding the registration of the Offer Capital Increase I will be met
will only be clear after expiry of the Additional Acceptance Period. According
to the Offer Document, a decision on whether and how the Offer will be
settled will be made no later than six months after expiry of the Acceptance
Period. The completion of the Offer may be postponed until then.
· A withdrawal from acceptance of the Offer is subject to the requirements set
out in the Offer Document and is possible only prior to the end of the
Acceptance Period. The GAGFAH shareholders’ right of disposal is restricted
with regard to the GAGFAH Shares for which the Offer has been accepted.
According to the Offer Document, Tendered GAGFAH Shares are likely to be
admitted to trading on the regulated market (Prime Standard) of the Frankfurt
Stock Exchange (Frankfurter Wertpapierbörse) under ISIN LU1152862774
(WKN A12 GFH) as of the third trading day following commencement of the
Acceptance Period. Trading with Tendered GAGFAH Shares on the regulated
market of the Frankfurt Stock Exchange is likely to be discontinued after close
of trading on the day prior to the day of the application for registration of the
execution of the necessary offer capital increases (in this respect see also
Section V.11 of this Statement). The Board of Directors points out that the
trading volume of the Tendered GAGFAH Shares may, at some times be low,
which may lead to purchase and sale orders not being executed or not being
executed promptly and to an increased volatility of, or negative impact on, the
share price.
· If the Bidder, persons acting in concert with it or its subsidiaries acquire
GAGFAH Shares over the counter within one year after publication of the
number of GAGFAH Shares it or they are entitled to after expiry of the offer
period and resulting from acceptance of the Offer (section 23 para. 1 no. 2
WpÜG) and if the value of the consideration granted or agreed for those shares
is higher than the consideration in the Offer, the Bidder is obligated to pay to
the GAGFAH shareholders having accepted the Offer a consideration in the
amount of the respective difference. Such a claim for a subsequent
improvement of the consideration under the Offer shall, however, not exist for
any over-the-counter acquisitions against payment of a higher consideration
after expiry of this subsequent acquisition period of one year. Furthermore, the
Bidder is also entitled to buy GAGFAH Shares on the stock exchange at a
higher price within the aforementioned one-year subsequent acquisition period
without having to adjust the consideration paid to those GAGFAH
shareholders which have already accepted the Offer.
· If the Offer is consummated, various structural measures can be subsequently
executed which may have the consequence that GAGFAH shareholders who
have not accepted the Offer will be entitled to compensation or adjustment
payments that may be lower or higher than the consideration under the Offer.
These structural measures may include, without limitation, a (company law)
squeeze-out (see Section 15.3 of the Offer Document), a (Company Law) SellOut Right (see Section 15.5 of the Offer Document) or a merger (see Section
8.5 of the Offer Document). GAGFAH shareholders who will accept the Offer
are not entitled to any such compensation or adjustment payments or any
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additional payments, even if such payments are higher. The compensation
payments, if any, are calculated on a different basis than the consideration
under the Offer and are subject to regulatory and potentially judicial control.
· The GAGFAH shareholders which accept the Offer will acquire DA Shares
upon completion of the Offer, i.e. shares in a European stock corporation
(Societas Europaea) that is governed by European and German law and has its
registered office in the Federal Republic of Germany. General meetings of DA
take place in the German language and the shareholders’ membership and
property rights are subject to German as well as European law and can,
therefore, substantially deviate from the rights of the shareholders of a
Luxembourg stock corporation (société anonyme).
· At present, GAGFAH’s profit distributions are not subject to any withholding
tax due to GAGFAH’s status as a securitisation company in Luxembourg.
Therefore, dividends distributed to GAGFAH shareholders are exempt from
withholding tax. By contrast, distributions made by DA are, in principle,
subject to withholding tax under German law provided the dividend payment
is not made from the tax contribution account (steuerliches Einlagekonto). In
the more recent past, DA has distributed dividends without withholding any
capital gains tax from the contribution account. If distributions are made from
the tax contribution account in the future as well, shareholders will be able to
collect dividends exempt from any withholding tax also after acceptance of the
Offer. The Board of Directors is not able to assess how future distributions
will be made by DA. If future distributions are not made from the tax
contribution account, the shareholders of DA will, therefore, generally receive
dividends after deduction withholding of capital gains tax. Whether the
withholding tax will result in an increase of the total tax burden of the relevant
shareholder on the basis of taxation rates applicable in the respective country
of residence depends on the investor’s tax situation and the tax provisions
applicable in the country of residence. In this respect, it is recommended that
the GAGFAH shareholders obtain tax advice in relation to their individual tax
situation. The imposition of capital gains tax on distributions can lead to an
increase in the shareholder’s tax liability and an accordingly reduced dividend
return.
2.
Potential disadvantages in case the Offer is not accepted
GAGFAH shareholders which do not accept the Offer and do not sell their GAGFAH
Shares in any other way remain shareholders of GAGFAH. However, they should pay
attention to, inter alia, the Bidder’s statements in Section 15 of the Offer Document as
well as to the following aspects:
· GAGFAH shareholders directly bear the risk relating to the future
development of the GAGFAH Group and the future development of the stock
exchange price of the GAGFAH Share.
· As a general rule, the future share price movements of the GAGFAH Shares
cannot be predicted. These movements are subject to all external influences
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linked to the overall economic situation and depend on the future business
development of the GAGFAH Group as well as on the supply of, and demand
for, GAGFAH Shares. It cannot be ruled out that the present stock exchange
price of the GAGFAH Shares has been influenced by the Bidder’s
announcement to make the Offer or its publication of the Offer Document and
that it will not maintain its current level.
· The non-acceptance of the Offer may have the consequence that the Minimum
Acceptance Rate provided as a Closing Condition is not reached and the Offer
will not be executed (in this respect see Section V.9 of this Statement). This
might result in considerable negative impacts on the stock exchange price of
the GAGFAH Share.
· GAGFAH Shares for which the Offer has not been accepted will, for the time
being continued to be traded on the stock exchange for the time being.
However, it is possible, depending on the number of Tendered Shares, that the
demand for GAGFAH Shares following completion of the Offer will be lower
than at present and that thus the liquidity of the GAGFAH Shares will
decrease. This may result in situations where sales orders cannot be executed
or cannot be executed in a timely manner. In addition, the potential restriction
on the liquidity of the GAGFAH Shares might have the consequence that
share price movements will be much more significant than in the past. If, due
to lower liquidity of the GAGFAH Shares, proper trading should no longer be
guaranteed, a revocation of the listing of GAGFAH Shares at the stock
exchange (delisting) is possible even without corresponding action taken by
the Bidder. In the event of such a delisting, there would be no more organised
public market for trading GAGFAH Shares. A termination of the listing of
GAGFAH Shares might substantially limit the possibility of selling GAGFAH
Shares.
· A significant reduction in the free float might have the consequence that the
GAGFAH Share ceases to fulfill the criteria defined by the relevant index
providers for inclusion in the MDAX, FTSE EPRA/NAREIT Global Real
Estate Index and TR/GPR Global 100 Index EUR. A future exclusion of the
GAGFAH Share from one or several of these indices might have the
consequence that investment funds or other institutional investors whose
investments are reflected by the relevant index sell their GAGFAH Shares.
This might result in an oversupply of GAGFAH Shares in a comparatively
illiquid market, which might adversely affect the stock exchange price of the
GAGFAH Shares.
· Following completion of the Offer, the Bidder might have the simple or
qualified majority required to enforce company law structural measures in the
general meeting of GAGFAH such as amendments to the articles of
association, capital increases, conversions (in particular mergers or changes in
legal form), a squeeze-out or dissolution. In particular, the Bidder is
considering, according to Section 8.5 of the Offer Document, a cross-border
merger of GAGFAH into DA.
Page 67
· The compensation or adjustment payments to the GAGFAH shareholders
within the scope of potential structural measures of the Bidder (e.g. in case of
a squeeze-out; see Section 15.3 of the Offer Document) may be higher or
lower than the consideration under the Offer.
· The Bidder states in Section 15.5 of the Offer Document that GAGFAH
shareholders who have not accepted the Offer can exercise the right, within the
scope of the Sell-Out Right under Art. 16 para. 1 of the Luxembourg Takeover
Law, to require the Bidder to acquire their shares if the Bidder (either itself or
together with the persons acting in concert with it) holds at least 90% of the
voting rights in GAGFAH (see in this respect Section V.7 of this Statement).
The Board of Directors is not able to assess whether the requirements for such
a Sell-Out Right will finally be met.
· In Section 15.5 of the Offer Document, the Bidder further states that
shareholders of GAGFAH who have not accepted the Offer may, due to the
Company Law Sell-Out Right, exercise the right to require the Bidder to
acquire their shares if the Bidder (either alone or together with the persons
acting in concert with it) following the execution of the Offer holds at least
95% of the voting capital as well as 95% of the voting rights in GAGFAH.
Furthermore, the remaining GAGFAH shareholders may have a Company
Law Sell-Out Right if the Bidder, either itself or together with the persons
acting in concert with it, following the execution of the Offer holds less than
95% of the voting capital and of the voting rights of GAGFAH and
subsequently acquires additional GAGFAH Shares with the consequence that
the Bidder, either itself or together with the persons acting in concert with it,
holds at least 95% of the voting capital and of the voting rights of GAGFAH.
The Board of Directors is not able to assess whether such options for a
subsequent sell-out will finally arise to the benefit of GAGFAH shareholders.
· Upon completion of the Offer or thereafter, the Bidder might cause GAGFAH,
to the extent permitted by law, to procure that the admission of the GAGFAH
Shares to trading on the regulated market of the Frankfurt Stock Exchange
and/or in the sub-segment of the regulated market of the Frankfurt Stock
Exchange is revoked with additional post-admission obligations or to resolve
upon the complete delisting of the GAGFAH Shares. In that case, the
GAGFAH shareholders would no longer benefit from the increased reporting
duties due to the stock exchange listing.
· In respect of a number of measures which the Bidder could execute by virtue
of a majority of votes in the general meeting of GAGFAH or enforce due to its
controlling position as a majority shareholder, the GAGFAH shareholders do
not necessarily have to be offered a compensation of any nature whatsoever.
Nevertheless, it cannot be ruled out that such measures might have an adverse
impact on the share price or the value of the GAGFAH Shares calculated on
the basis of the company value.
Page 68
· Provided the Bidder holds the required majority of GAGFAH Shares, it may
independently pass resolutions in the general meeting with regard to the use of
a potential balance sheet profit.
· As dividend payments of GAGFAH, due to its status as a securitisation
company in Luxembourg, reduce the income of the company, dividend
distributions made by GAGFAH to German shareholders, depending on their
fiscal status, have involved a tax disadvantage since 2014 because, due to the
so-called correspondence principle, the so-called partial income method
(Teileinkünfteverfahren), the separate rate for income from capital investment
(Abgeltungssteuer - withholding flat tax) as well as the tax exemption for
certain corporations (in case of a stake of at least 10%) are not applicable in
Germany.
X.
Interests of the members of the Board of Directors of GAGFAH and
other board members of the GAGFAH Group
1.
Provisions under the Business Combination Agreement
In Section 17 of the Offer Document, the Bidder describes the provisions of the
Business Combination Agreement which provide that the following payments of
money and cash-equivalent benefits shall be offered to Thomas Zinnöcker, present
member of the Board of Directors, as well as to Mr. Gerald Klinck as member of the
management of GAGFAH Holding GmbH, the management company of the
operating subsidiaries of the GAGFAH Group:
· DA will offer Mr. Zinnöcker, instead of his present contract, a service
agreement for two years as deputy chairman on DA’s management board at
DA’s standard conditions with responsibilities for sales, acquisitions and
integration. All claims of Mr. Zinnöcker under current incentive programmes
will (subject to a decision by GAGFAH’s Board of Directors) be paid, as
applicable, on a fully vested basis for the remaining term. Mr. Zinnöcker will
not participate in a corresponding incentive programme of DA.
· DA will offer Mr. Klinck, instead of his present contract, a service agreement
as chief controlling officer at DA with a term of three years and at DA’s
standard conditions.
· Mr. Klinck and the other participants of stock option, phantom stock and
comparable employee incentive programmes will (subject to a decision by
GAGFAH’s Board of Directors) have the opportunity, at their choice, to be
paid out all claims arising from the existing programmes for the respective
remaining term of the contract or programme on a fully vested basis, or to
convert these claims into an economical equivalent programme of DA.
The Board of Directors has not yet passed any resolution on the aforementioned issues
and intends to deal with these items in one of its next meetings.
Page 69
Furthermore, the Bidder and GAGFAH agreed in the Business Combination
Agreement that they would use their influence to attempt that Mr. Gerhard Zeiler
(present chairman of the Board of Directors of GAGFAH), Mr. Hendrik Jellema (as of
1 January 2015 appointed member of the GAGFAH Board of Directors) and Mr.
Daniel Just (as of 1 January 2015 appointed member of the GAGFAH Board of
Directors) will be appointed as new members to the Bidder’s supervisory board,
which is intended to be enlarged to comprise twelve shareholders’ representatives in
the future.
2.
Termination rights of the members of the senior management in case of
Change of Control
The employment contracts concluded by Mr. Zinnöcker, Mr. Klinck and Mr. Kuß
with the GAGFAH Group provide for special rights of termination in case of a
Change of Control in respect of GAGFAH Group. Each of the aforementioned
individuals is entitled to terminate his employment relationship within three weeks
from occurrence of the Change of Control by giving one month’s notice with effect to
the end of a month. In case of a termination, there are the following claims:
· Mr. Zinnöcker will receive a cash compensation consisting of the total of their
annual fixed salary and the granted bonus for the preceding financial year,
payable in twelve monthly instalments. In addition, he will receive the Stock
Grants he would have been granted during the twelve months following the
exercise of the special right of termination.
· Each of Mr. Klinck and Mr. Kuß will receive a cash compensation consisting
of the total of his double annual fixed salary and double bonus for the
preceding financial year, payable in twelve monthly instalments. In addition,
they will receive the Stock Grants they would have been granted during the
twenty-four months following the exercise of the special right of termination.
It is currently the case that the relevant special rights of termination in case of a
Change of Control can be exercised as of the time of the Change of Control within the
meaning of the provisions set out in the employment contracts. In order to avoid the
exercise of special rights of termination directly after the Change of Control and to
largely that the present management essentially continues its service at least until the
next ordinary general meeting of GAGFAH, the Board of Directors, at its meeting of
22 December 2014, resolved to use its influence to make sure that members of the
senior management (see Section VIII.4 of this Statement in relation to the resolution
concerning further executives) are offered a postponement of the period granted for
exercising the special right of termination in case of a Change of Control to a period
of three weeks after the next ordinary general meeting of GAGFAH. The
implementation of this resolution is, inter alia, still subject to board resolutions of the
relevant employer company as well as to the approval of the executive concerned.
Page 70
XI.
Intentions of the members of the Board of Directors and the managing
directors (Geschäftsführer) of GAGFAH Holding GmbH to accept the
Offer
From the members of the Board of Directors Mr. Gerhard Zeiler, Dr. Jürgen
Allerkamp, Mr. Dieter H. Ristau, Mr. Yves Wagner and Mr. Thomas Zinnöcker hold
GAGFAH Shares. Mr. Gerald Klinck and Mr. Nicolai Kuß, being managing directors
(Geschäftsführer) of GAGFAH Holding GmbH besides Mr. Zinnöcker, also hold
GAGFAH Shares. All these persons intend to accept the Offer in respect of all
GAGFAH Shares held by them. However, each of the aforementioned persons
declares this intention subject to the reservation that the competent boards of the
GAGFAH Group will release each of them, with regard to the acceptance of the
Offer, from any contractual restrictions on disposal which may apply to them in
relation to their GAGFAH Shares.
XII.
Recommendation
In view of the explanations provided in this Statement and by considering the overall
circumstances of the Offer, as well as the objectives and intentions of the Bidder, the
Board of Directors takes the view that the consideration offered by the Bidder is
adequate in the sense of section 31 para. 1 WpÜG and that the transaction is in the
interest of GAGFAH, its shareholders and other stakeholders.
For this reason and in consideration of the foregoing explanations, the Board of
Directors supports the Offer and recommends the GAGFAH shareholders to accept
the Offer.
Each GAGFAH shareholder is responsible for making his own decision on the
acceptance or refusal of the Offer by considering the overall circumstances and
including his individual situation and his personal assessment of the potential future
development of the value and the stock exchange price of the GAGFAH Share. The
Board of Directors does not assume any liability in the event that the acceptance or
non-acceptance of the Offer subsequently proves to be economically disadvantageous.
23 December 2014
Gagfah S.A.
The Board of Directors
Page 71
List of Definitions
2014 Convertible Bonds ...........................................................................................10
9M2014 ....................................................................................................................13
Acceptance Period ....................................................................................................22
Additional Acceptance Period ..................................................................................23
Authorised Capital....................................................................................................17
Authorised Capital 2011 ............................................................................................ 9
Authorised Capital 2014 ...........................................................................................18
Authorised Capitals ..................................................................................................18
BaFin .......................................................................................................................22
Bidder ....................................................................................................................... 6
Board of Directors ..................................................................................................... 6
Bofa Merrill Lynch ...................................................................................................47
Bondholders .............................................................................................................10
Business Combination Agreement ............................................................................20
Cash Component ....................................................................................................... 6
CET..........................................................................................................................22
Change of Control ....................................................................................................30
Closing Conditions ...................................................................................................32
Combined Company .................................................................................................54
Company Law Sell-Out Right...................................................................................28
Conditional Capital 2013 ..........................................................................................18
DA ............................................................................................................................ 6
DA Credit Agreement ...............................................................................................39
DA Group ................................................................................................................. 6
DA Offer Shares ........................................................................................................ 6
Delivery Obligation ..................................................................................................38
Deutsche Bank .........................................................................................................47
Effective Date ..........................................................................................................30
EPRA NAV ..............................................................................................................16
Excess Shares ...........................................................................................................24
Exchange Trustee .....................................................................................................25
Exchange Trustee I ...................................................................................................25
Exchange Trustee II..................................................................................................25
Existing DA Shares ..................................................................................................17
Financial Year 2011 .................................................................................................13
Financial Year 2012 .................................................................................................13
Financial Year 2013 .................................................................................................13
GAGFAH .................................................................................................................. 6
GAGFAH Group ....................................................................................................... 6
GAGFAH Shares....................................................................................................... 6
GAGFAH Shares Covered by the Sell-Out ...............................................................28
GrEStG ....................................................................................................................27
Guarantors................................................................................................................50
IDW S1 ....................................................................................................................49
IDW S8 ....................................................................................................................49
IFRS .........................................................................................................................13
Integration Committee ..............................................................................................53
Page 72
J. P. Morgan .............................................................................................................24
Luxembourg Squeeze-out and Sell-Out Law.............................................................29
Luxembourg Takeover Law....................................................................................... 7
Material Adverse Change .........................................................................................35
Material Compliance Violation .................................................................................35
Merger .....................................................................................................................54
Minimum Acceptance Rate ......................................................................................34
Offer ......................................................................................................................... 6
Offer Capital Increase I ............................................................................................25
Offer Capital Increase Ia ...........................................................................................24
Offer Capital Increase Ib ..........................................................................................25
Offer Capital Increase II ...........................................................................................29
Offer Capital Increase IIa .........................................................................................29
Offer Capital Increase IIb .........................................................................................29
Offer Document ........................................................................................................ 6
Relevant GAGFAH Shares .......................................................................................34
Relevant Person(s)....................................................................................................30
Rothschild ................................................................................................................47
Securities Act ............................................................................................................ 8
Sell-Out Period .........................................................................................................28
Sell-Out Right ..........................................................................................................28
Settlement Agent ......................................................................................................26
Share Component ...................................................................................................... 6
Statement .................................................................................................................. 6
Stock Grants .............................................................................................................10
Target Company ........................................................................................................ 6
Tendered GAGFAH Shares ....................................................................................... 6
Third-Party Bank ......................................................................................................24
Total Transaction Costs ............................................................................................39
U.S. Shareholders ...................................................................................................... 8
WpHG ......................................................................................................................18
WpÜG ....................................................................................................................... 6
WpÜG Applicability Regulation................................................................................ 6
WpÜG-AngebotsVO ................................................................................................22
Page 73
APPENDIX 1 – GROUP WORKS COUNCIL STATEMENT
GAGFAH Takeover:
Works council fears job losses
Deutsche Annington plans to make a saving of 47 million euros in operational costs as
part of the takeover of the GAGFAH Group. The GAGFAH Group Works Council
fears that many employees will lose their jobs. According to information received to
date, this would primarily impact the head offices of GAGFAH and DA and the
overheads functions at both companies.
GAGFAH has already considerably reduced its administrative costs through a number
of different structural changes – most recently in 2014. The Group Works Council
(GWC) considers it to be impossible to continue to save millions in costs without
substantial disadvantages being suffered at staff level.
Thus far no binding commitments have been made that have served to allay these
concerns. DA’s offer document does not mention any guaranteed protection against
redundancy or dismissal akin to the commitments made by the BfA (known today as
Deutsche Rentenversicherung, Germany’s pension insurance fund) when GAGFAH
was sold in 2004. The statements made by DA in this respect do not go beyond mere
declarations of intent. The GWC at GAGFAH sees a considerable need for action
here.
The offer document contains many positive statements with respect to the retention of
employee participation rights on supervisory boards, to works council structures and
rights of the works councils to exercise influence, as well as with respect to
compliance with collective bargaining agreements. A binding commitment to refrain
from making redundancies for a specified period of time would serve to support the
respective declarations of intent in a sustainable way.
With Gerhard Zeiler and Dr. Wulf Bernotat there are two well-known guarantors
available to ensure compliance with the declarations of intent. The GWC hopes that
this will ensure an effective scrutiny, which will then also contribute to avoiding
redundancies.
The GWC at the GAGFAH Group welcomes the plan to organise the integration of
DA and GAGFAH in a fair and equal manner. The works councils of both entities
should be involved in this process to the best possible extent. The GWC assumes that
the works councils of DA and GAGFAH will be represented at all levels of the
relevant integration committees.
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DA could ease the concerns of both entities’ employees by making binding
commitments and guarantees. This would have a positive impact on the integration
process in a sustainable way.
Markus Graf
GWC - Chairman
Peter Breddemann
Deputy Chairman
Page 75
APPENDIX 2 – GAGFAH SUBSIDIARIES
Persons acting in concert with GAGFAH
(GAGFAH subsidiaries) Valid as at: 23 December 2014
Entity
GAGFAH Holding GmbH
Registered office
Essen, Germany
KALIRA Grundstücks-Verwaltungsgesellschaft mbH
Grünwald, Germany
KALIRA Grundstücksgesellschaft mbH & Co. KG
Grünwald, Germany
GAGFAH Verwaltung GmbH
Essen, Germany
DW Management GmbH
Essen, Germany
GAG ACQ Ireland Limited
Clonee, Ireland
UC ACQ Ireland Limited
Clonee, Ireland
GAGFAH Operations Advisor GmbH
Essen, Germany
GAGFAH Transaktionsmanagement GmbH
Essen, Germany
GAGFAH GmbH
Essen, Germany
GAGFAH M Immobilien-Management GmbH
Essen, Germany
GAGFAH I Invest GmbH & Co. KG
Essen, Germany
GAGFAH B Beteiligungs GmbH
Essen, Germany
GAGFAH A Asset GmbH & Co. KG
Essen, Germany
VHB Facility Management GmbH
Essen, Germany
Neues Schweizer Viertel Betriebs+Service GmbH & Co. KG
Berlin, Germany
Schweizer Viertel Grundstücks GmbH
Berlin, Germany
IVS Immobilienversicherungsservice GmbH
Mülheim an der Ruhr,
Germany
HaBeGe Bau- und Projektentwicklungsgesellschaft mbH
Essen, Germany
GAGFAH Facility Management GmbH
Essen, Germany
Page 76
Entity
Haus- und Boden-Fonds 19
Registered office
Essen, Germany
Haus- und Boden-Fonds 33
Essen, Germany
Haus- und Boden-Fonds 37
Essen, Germany
Haus- und Boden-Fonds 38
Essen, Germany
GERMAN RESIDENTIAL FUNDING 2013-1 LIMITED
Dublin, Ireland
NILEG Immobilien Holding GmbH
Hanover, Germany
NILEG Real Estate GmbH
Hanover, Germany
NILEG Real Estate GmbH & Co. Management KG
Hanover, Germany
NILEG Norddeutsche Immobiliengesellschaft mbH
Hanover, Germany
GAGFAH S Service GmbH
Essen, Germany
Osnabrücker Wohnungsbaugesellschaft mit beschränkter Haftung
Osnabrück, Germany
NILEG Norddeutsche Beteiligungs GmbH
Hanover, Germany
NILEG Commercial Asset GmbH & Co. KG
Hanover, Germany
NILEG Residential Asset GmbH & Co. KG
Hanover, Germany
Wohnungsgesellschaft Norden mit beschränkter Haftung
Hanover, Germany
WGNorden Beteiligungs GmbH
Hanover, Germany
WGNorden Asset GmbH & Co. KG
Hanover, Germany
Wohnungsbau Niedersachsen GmbH
Hanover, Germany
VHB FM GmbH
Essen, Germany
WBN Beteiligungs GmbH
Hanover, Germany
WBN Asset GmbH & Co. KG
Hanover, Germany
GERMAN RESIDENTIAL FUNDING 2013-2 LIMITED
Dublin, Ireland
WOBA HOLDING GMBH
Dresden, Germany
Opera Co-Acquisition GP GmbH
Dresden, Germany
Opera Co-Acquisition GmbH & Co. KG
Dresden, Germany
WOBA DRESDEN GMBH
Dresden, Germany
Immo Service Dresden GmbH
Dresden, Germany
GAGFAH Facility Management Dresden GmbH
Dresden, Germany
Page 77
Entity
Bau- und Siedlungsgesellschaft Dresden mbH
Registered office
Dresden, Germany
Liegenschaften Weißig GmbH
Dresden, Germany
WOHNBAU NORDWEST GmbH
Dresden, Germany
SÜDOST WOBA DRESDEN GMBH
Dresden, Germany
Parkhaus Prohlis GmbH
Dresden, Germany
12.CR Immobilien Vermietungsgesellschaft mbH & Co. SÜDOST Leipzig, Germany
WOBA Striesen KG
WOHNBAU NORDWEST Dienstleistungen GmbH
Dresden, Germany
GAGFAH Acquisition 1 GmbH
Essen, Germany
GAGFAH Acquisition 2 GmbH
Essen, Germany
GAGFAH Erste Grundbesitz GmbH
Essen, Germany
GBH Acquisition GmbH
Essen, Germany
GBH Service GmbH
Heidenheim an
Brenz, Germany
der
GBH Heidenheim Verwaltung GmbH
Heidenheim an
Brenz, Germany
der
Objekt Dresden GbR
Hanover, Germany
Grundstücksentwicklungsgesellschaft Oesselse “Langes Feld”
GbR
Essen, Germany
Wolmirstedt GbR
Essen, Germany
Möser GbR
Essen, Germany
GAGFAH Property Management GmbH
Essen, Germany
GAGFAH Zweite Grundbesitz GmbH
Essen, Germany
GAGFAH Dritte Grundbesitz GmbH
Essen, Germany
GAGFAH WEG Service GmbH
Essen, Germany
GAGFAH Asset Management GmbH
Essen, Germany
Hannover Region Grundstücksgesellschaft Verwaltung mbh &
Co. Business-Park Hannover-Nord KG
Hanover, Germany
GRIFFIN Flats NRW GmbH
Frankfurt/Main,
Germany
Page 78
Entity
VITU AcquiCo I GmbH
Registered office
Frankfurt/Main,
Germany
Page 79
APPENDIX 3 – FAIRNESS OPINION
BANK OF AMERICA MERRILL LYNCH
Page 80
APPENDIX 4 – FAIRNESS OPINION DEUTSCHE BANK
Page 81
APPENDIX 5 – FAIRNESS OPINION ROTHSCHILD
Page 82