Adler Real Estate buys Israeli co ADO at 82% premium

Dudi Daniel

ADO group is currently controlled by Apollo Global Management and the Dayan family.

German real estate giant Adler Real Estate is acquiring control of Israeli company ADO Group (TASE: ADO), which operates in the Berlin residential real estate market through ADO Properties.

Adler will acquire ADO Group in a reverse triangular merger (into a special purpose vehicle that it will found) at €25.75 (NIS 100) per ADO share, an 82% premium on ADO Group's current share price on the Tel Aviv Stock Exchange (TASE). The merger will be at a company valuation of €708 million (NIS 2.75 billion) for ADO Group. After the deal is completed, ADO Group will be delisted from the TASE and become a private company.

ADO Group has a portfolio of 23,700 housing units in Berlin, plus commercial space.

ADO Group is currently controlled by foreign fund Apollo Global Management (32%) and the Dayan family (19.7%), which acquired some of the company's shares from Israeli investment institutions two years ago and 30% more from Shikun & Binui jointly with other concerns.

Shikun & Binui posted a prodigious NIS 480 million capital gain on the sale in the first quarter of this year, leaving it with 7.5% of ADO Group's capital. If the new deal is completed in the coming months, Shikun & Binui will post an additional capital gain.

The deals in March with Shikun & Binui were at NIS 87-88 a share. Since then, however, ADO Group's share price on the TASE has plummeted to NIS 55, following the proposal by the Berlin Senate to freeze rents in the city for five years.

Two weeks ago, the ruling coalition in Berlin changed the bill to freeze rent in the city, and softened its measures. Under the new plan, an annual 1.2% rent increase (inflationary adjustment) will be allowed in the next five years, instead of a complete freeze. A further increase of up to €1.40 per square meter will be allowed if a housing unit was renovated in the past five years.

Adler Real Estate is among the leading residential real estate companies in Germany, and is one of the five largest public companies in this sector. The company focuses on developing residential real estate in metropolitan areas around Germany. The result of this strategy is that nearly half of the company's rental income comes from its properties in the 10 cities in which it is the most active. The 20 cities in which Adler Real Estate is most active generate two thirds of its revenue. The company manages over 50,000 housing units.

In February 2018, Adler Real Estate acquired a 41.04% controlling interest in Brack Capital Properties NV, a company active in the German real estate market, from Teddy Sagi for NIS 1.4 billion. Sagi acquired control of the company in May 2017, and posted a NIS 300 million profit on his investment.

ADO Group CEO is Dudi Daniel. 

Published by Globes, Israel business news - - on September 23, 2019

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