Nationalization for Hypo on agenda

Bloomberg

The German bank-rescue fund, Soffin, bid 1.39 euros ($1.84) a share, or about 290 million euros, for the Munich-based lender, it said in a statement yesterday. The government aims to acquire all of the outstanding shares with the offer, which is 16 percent above Wednesday’s closing price of 1.20 euros.

Germany already provided 102 billion euros of credit lines and debt guarantees to sustain Hypo Real Estate after a funding shortage at its Dublin-based Depfa Bank unit brought the company to the brink of bankruptcy. J.C. Flowers & Co., which leads a group of investors holding 24 percent of the bank, said last week it may take legal action to block nationalization. "With its public offer and the chosen offer premium, Soffin underlines that it wishes to stabilize the financial market using a market-oriented approach if possible and by adhering to existing market practice," said Hannes Rehm, chairman of the fund.The state acquired an 8.7 percent stake in Hypo Real Estate last month as a first step toward taking control. By gaining a majority stake with yesterday’s offer, the government would clear the way for approval of a capital increase at an extraordinary general meeting. That would enable the state to squeeze out remaining shareholders.

Chancellor Angela Merkel, facing re-election in September, has drawn criticism even from potential allies for accepting Flowers’ expropriation. Guido Westerwelle, leader of the opposition Free Democrats, Merkel’s preferred coalition partner, told WirtschaftsWoche magazine this week that she risks Germany’s reputation as a "safe investment location."Flowers will "carefully study" the offer and has a "clear preference" to remain a shareholder and to be "treated equally" to other German banks forced to use the rescue package, a Germany-based spokesman said yesterday.

The 1.39 euros per share is an "attractive price" and is 10 percent above the statutory minimum price of 1.26 euros, Soffin said, adding there’s no minimum acceptance level for the bid."In my eyes, it’s a very attractive offer that’s more than the fair value of the company and I’d recommend everyone take it," said Thomas Stoegner, a Frankfurt-based analyst at Sal. Oppenheim. "The alternatives are a lot worse with the new law."