German property group to buy Depfa Bank for nearly 5.7 bln euros

FRANKFURT (AFP) — German real estate financier Hypo Real Estate (HRE) is to acquire German-Irish bank Depfa Bank in a surprise 5.7-billion-euro (7.9-billion-dollar) deal that failed to convince investors and analysts on Monday.

HRE is offering 6.80 euros per share in cash, plus 0.189 HRE share for every Depfa share held, representing an overall purchase price of 16.14 euros per share for Depfa, the two companies said in separate statements.

Depfa is a leading provider of financial services to public sector clients.

The price represents a premium of 17 percent over the closing price of Depfa shares last Friday.

And HRE said the deal would have a positive impact on earnings per share in 2008, with the so-called synergy or cost-saving effects to reach more than 150 million euros after 2010.

Buying Depfa will turn HRE into a new major force in the banking sector in Germany, with a workforce of around 2,000 and net assets of 385 billion euros, overtaking current number one in the sector, Eurohypo.

Depfa Bank has been the subject of persistent takeover rumours recently, with Franco-Belgian bank Dexia or Swiss giant UBS also rumoured to be interested.

The deal with HRE, created in 2003 when HypoVereinsbank spun off its real-estate financing activities, is an amicable one, with Depfa's management board approving the deal.

The takeover now has to be approved by Depfa's shareholders and the competition authorities.

HRE said it would finance the deal in part via a capital increase and it expected the takeover to be finalised at the beginning of October.

The transaction "will, at a stroke, raise our expanding public finance and infrastructure financing activities to the level and quality of a leading global player, without the otherwise inevitable considerable start-up investments," said HRE chief executive Georg Funcke.

The last major acquisition among Germany's private-sector banks was when HypoVereinsbank was taken over by Italian giant UniCredit for 15 billion euros in 2005.

Analysts were nevertheless not unanimous in their approval of the HRE-Depfa deal.

While HVB analyst Andreas Weese welcomed the announcement, Sal. Oppenheim analyst Thomas Stoegner said the price was costly for HRE and the cost-saving potential "vague".

Investors were similarly sceptical, with HRE shares showing a loss of 6.1 percent at 46.17 euros around midday. And while Depfa shares were showing gains of 12.68 euros at 15.55 euros, the share price was still lower than the overall offer price.

The two banks also published interim earnings, with HRE shares beating expectations by lifting pre-tax profit by 25 percent to 355 million euros.

Depfa, on the other hand, saw its net profit fall by 10 percent in the second quarter of this year.

Defpa is listed on the Frankfurt stock exchange, but headquartered in Dublin.