At the end of two years of struggles and charged relations with the controlling owner of Brack NV, the institutional bodies and investment funds from Israel sell their holdings (24.1%) in the German-based real estate company, at a 40% premium to the market price and a total value of 253 million euros. NIS 900 million).
The buyer in the transaction is the German company LEG Immobilien, which has a portfolio of 165,000 apartments for rent in Germany, and wants to continue to expand in this field. As part of the transaction, LEG will also acquire a 6.8% stake in Brack NV from the controlling shareholder of the German company Adler Group, in exchange for $ 75 million, and it may later acquire the remaining shares in Brack.
The entire transaction will take place for 328 million euros (NIS 1.17 billion), and according to LEG reflects a 4% discount on the net asset value (NAV) of Brack NV at the end of September 2021. Brack NV has been engaged in real estate in Germany since 2004. The company has three operating segments: a yielding portfolio of approximately 12,000 apartments for rent, a yielding portfolio for trading of approximately 56,000 square meters, and a residential development activity that includes the planning, construction and marketing of 2,150 housing units.
The deal with LEG (which will hold a total of 31% of the shares) reflects a value of 1.06 billion euros (NIS 3.77 billion) for Brack NV, while prior to the announcement the company was traded at a value of 766 million euros (NIS 2.73 billion). Brack NV has equity Attributed to shareholders of 876 million euros (as of the end of September 2021), so the deal reflects a premium of about 20% relative to the company’s equity.
Simultaneously with the sale of some of its shares, Adler undertook to respond by the end of September 2022 to a full takeover bid that LEG may submit to the balance of Brack NV shares held by Adler and the public (69.1%) at a minimum price of 157 euros (approximately NIS 559) per share. The tender offer will be submitted only after a due diligence is performed by LEG, and to its satisfaction.
The price of the tender offer reflects a premium of approximately 58% on the closing price of Brack NV’s shares on the Tel Aviv Stock Exchange, prior to the announcement.
It should be noted that the completion of the transaction is conditional on the approval of the German regulator who is responsible for overseeing the rental housing market in the country and who wants to make sure that no player becomes too strong in the cities in which he operates. This approval should be received within 6-8 weeks, taking into account the upcoming Christmas and civil New Year holidays.
Third hand change in recent years?
The control of Brack NV has changed hands twice in recent years, and may now pass once more. The current controlling shareholder, Adler, is one of the leading residential real estate companies in Germany. Adler currently holds 69.8% of the shares in Ark NV, which it acquired in April 2018 for about NIS 2.38 billion (about 550 million euros at the time of payment).
The deal included the purchase of the holdings (41%) of the then owner of the sign, the billionaire Teddy Sagi, for NIS 1.4 billion, as well as the purchase of additional shares from Brack NV executives and the public for an amount of NIS 980 million.
Sagi himself bought the controlling shares in Brack from Shimon Weintraub and Ronen Peled in May 2017 for about NIS 1.1 billion, so in the sale he recorded a profit of about NIS 300 million and a return of about 27% on his investment in just one year.
Those who also sold their shares in the deal with Adler were the former CEOs of former Brack NV, Gal Tennenbaum and Ofir Rahamim, who had previously waged a bitter struggle with owners Weintraub and Peled. Germany’s real estate, and is traded at a value of about NIS 2 billion.
Net profit of 73 million euros
Since the deal in which Adler bought Sagi’s shares, the Brack share has declined and showed a negative adjusted return of about 8% in the last three years (before the deal was reported), while the Tel Aviv Real Estate and Tel Aviv-90 indices recorded returns of about 120% and about 98%, respectively.
In its press release, LEG reveals that the current deal was led and initiated by the Israeli activist hedge fund Brosh, which holds an estimated 4% -4.9% stake in Brack NV shares. According to market sources, the members of the Cypress Fund worked for the deal for many months, and when they succeeded in formulating it, they offered it to all the institutional bodies in Israel, who were all happy to respond to it and sell their shares at this price.
The Brosh Foundation, managed by Amir Efrati, has for the past two years led struggles with Brack NV and its controlling owner, Adler Group, over the day – to – day running of the company and its corporate governance. The struggle was led by Brosh in collaboration with two major minority shareholders in Brack NV, Harel Insurance Company and Psagot Investment House, which was recently sold to Altshuler Shaham Provident and Pension.
Harel currently holds 7.03% of Brack Capital shares, while Altshuler Shaham Investment House holds 6.93% of the company’s shares. The rest of the shares are held by the Brosh Fund and many institutional entities, including the Phoenix-Excellence Group, Hachshara Insurance, Moore, Yellin-Lapidot, Analyst, IBI Ayalon, Meitav Dash and more.
Decrease in revenue compared to last year
Brack NV’s financial statements show that in the first nine months of 2021, the company recorded net income from rent and property management of 37 million euros, reflecting a decrease of 1.5% compared to the same period last year. In addition, the company recorded a profit of 1 million euros from the sale of apartments in the first nine months, compared to 13.5 million euros in the corresponding period. Net profit for shareholders The company’s shareholders in the first nine months of the year amounted to 73 million euros, reflecting a decrease of about 5% compared to the same period last year.