The planned takeover of the real estate group Deutsche Wohnen by its competitor Vonovia has met with enormous resistance from one of the largest shareholders.

The American hedge fund Davidson Kempner, which holds around 3.2 percent of the share capital in Deutsche Wohnen and is also invested in Vonovia, has applied for an injunction.

"Davidson Kempner has taken legal action and will hold the board of directors accountable," the investor announced on Thursday.

With the injunction, the major shareholder wants to prevent Deutsche Wohnen from selling 0.93 percent of its own shares to Vonovia and also from issuing 5.17 percent new shares.

The investor also reserves the right to take further legal steps.

Jonas Jansen

Business correspondent in Düsseldorf.

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“Vonovia and Deutsche Wohnen have circumvented shareholder rights,” argues the investor in the public statement.

Part of Vonovia's offer is that Deutsche Wohnen's management board has been offered board positions in the joint company.

"The Deutsche Wohnen Management Board has subsequently taken a number of measures that are unprecedented and legally questionable and whose sole purpose is to help Vonovia gain control over Deutsche Wohnen," said Davidson Kempner.

“And that despite the fact that the shareholders oppose the takeover and its conditions.” Although the conditions were only minimally adjusted after the original, failed offer, the management board of Deutsche Wohnen immediately approved the renewed takeover offer.

Vonovia has already failed twice

Deutsche Wohnen declared that it would take a stand against Davidson Kempner's actions. The major shareholder is particularly bothered by how the management board of Deutsche Wohnen has taken measures to guarantee the takeover, so Vonovia is to be supplied with almost 10 percent of the Deutsche Wohnen shares. 3.53 percent of the company's own shares have already been sold; they went to Vonovia in the previous takeover offer at EUR 52 per share. Davidson Kempner wants to prevent further measures. The major shareholder also criticizes Vonovia for having waived all of the terms and conditions of the offer. This means that the takeover is de facto a done deal. "With this, the management board has given Vonovia control of Deutsche Wohnen and bypassed its own shareholders," said Davidson Kempner.

Vonovia had already failed twice with the takeover of the competitor. In 2016 Vonovia CEO Rolf Buch tried against the will of the Deutsche Wohnen Management Board, this year the planned transaction, worth around 19 billion euros, was supported by both Management Board members and the Supervisory Board. A merger would of course also change a few things for Deutsche Wohnen boss Michael Zahn: He is to become Buch's deputy. The management board and supervisory board of the Berlin company had campaigned very aggressively for the merger.

The committees are convinced that the offer “reflects the successful development and value of our company,” Zahn said at the company's general meeting.

"The necessary investments in affordable housing, climate protection and new buildings can be shouldered much better together after a merger." A merger is also in the "fundamental interest" of the shareholders, argued the Deutsche Wohnen boss.

"A dangerous precedent"

The board of directors and the supervisory board will of course also benefit from the takeover because they had announced that they would sell all of their shares.

On September 16, Deutsche Wohnen announced that Zahn had accepted the offer of 53 euros per share.

He received 5.1 million euros from the sale of a little more than 96,000 shares.

It was not until June 16 that he acquired 26,506 shares at a price of one euro each as part of a stock option program.

According to the latest annual report, Zahn still had slightly more than 35,000 shares from the 2014 stock option program at a price of one euro each.