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German buyout market ends the year strongly

Expectations that the German buyout market is starting to deliver on its potential have been fuelled in the last few weeks by announcements of a series of upper-end deals and bids.

Blackstone Group acquired a portfolio of German residential properties from WCM Beteiligung und Grundbesitz for €1.39bn. Chad Pike, Blackstone’s head of European real estate, said the portfolio has stable cashflows and gives Blackstone a platform for further acquisitions in the German property market.

The German real estate market is seen a major source for private equity deal flow. Fortress Investments has already acquired property management group Gagfah for €3.5bn. Goldman Sachs and Cerberus are acquiring GSW Group for €2bn.

In the WCM transaction, Blackstone will acquire 31,000 apartments in northern and western Germany. The move follows a €1bn purchase of commercial properties from Deutsche Bank last year.

Meanwhile, Apax has taken a 49% stake in LR International, a group of companies that manufacture beauty products and nutritional supplements. That transaction is significant because buyouts of family-owned businesses are still fairly rare in Germany, despite hopes that the Mittelstand sector is opening up.

The cosmetics company has notched up double digit growth since it was founded in 1985. Sales to end-consumers were worth around €250m in 2003. Helmut Spikker, principal shareholder and founder of the company is retaining a 51% stake. Founding partner Joachim Hickmann will sell his entire 33% stake in the business. Apax has also doubled up with Cinven on the equity contribution to CBR Holdings (See page 4.)

Apax and Goldman Sachs are also planning to sell their stakes in ish, the German cable company. The two firms jointly hold less than 20% in the business, but could be looking to sell for up to US$2bn in an auction run by Citigroup. Ish is the regional cable company in the state of North Rhine-Westphalia, which was formed by US cable investor Richard Callahan.

KKR is ending a very busy year in Germany with a €260m recommended takeover bid for recycling firm Duales System Deutschland. KKR needs to secure the support of 95% of the shareholders before December 23.

DSD was founded in 1990 as a non-profit organisation. It organises the collection and recycling of packaging across Germany in co-operation with 414 waste management partners and has around 600 shareholders from trade and industry. The German Cartel Office has pushed the company towards finding a public investor due to its monopoly position.