Hypo Real Estate Holding AG, Germany's second-biggest commercial-property lender, agreed to buy Depfa Bank Plc for 5.7 billion euros ($7.9 billion) to form Germany's biggest public and real-estate financing company.
Hypo Real Estate will pay €6.80 in cash and 0.189 new of its own shares for each Depfa Bank share, the Munich-based lender said today. This values each Depfa share at 16.14 euros, 17 percent more than the July 20 closing price, the bank said.
Hypo Real Estate Chief Executive Officer Georg Funke is expanding to areas such as financing roads, railways or airplanes to respond to growing competition among property lenders. Depfa is Europe's second-biggest provider of public finance after Dexia SA.
"The combination makes sense," Konrad Becker, an analyst at Merck Finck & Co in Munich, said. "Both companies are in an investment and expansion phase and may be able to save costs."
Depfa was created when Depfa Deutsche Pfandbriefbank AG split in June 2002. The other half, Aareal Bank AG, comprises the former company's real-estate business.
The Dublin-based lender's acquisition of First Albany's municipal-bond business in March gave it a foothold in the US, where the New York- based company has 70 bankers and traders in nine offices.
Hypo Real Estate is Germany's No. 2 commercial property lender after Eurohypo AG, a unit of Commerzbank AG. The lender was spun of by HVB Group, now owned by UniCredit SpA, in 2003.
New Shares, Convertible Bond
"The combination of the two companies presents an opportunity to create a globally leading provider of financial services to the public sector, in commercial real-estate finance and in infrastructure finance," Hypo Real Estate said today.
The purchase will have a "considerable impact" on the combined company's earnings. A new outlook will be given at a later date, Hypo Real Estate said.
Adjusted net income excluding the effect of capitalized losses carried forward rose 30 percent to 137 million euros in the second quarter, Hypo Real Estate said in a separate statement on Monday.
Earlier this month, the Munich-based lender raised its full-year target for pretax profit to more than 710 million euros from a previous forecast of at least 680 million euros.
Depfa's second-quarter net income declined 10 percent to 126 million euros from 140 million euros, the bank said in a separate release. Net interest income fell 8 percent to 101 million euros in the period.
Hypo Real Estate will issue 67 million new shares and sell 450 million euros in convertible bonds to help finance the purchase.