M&A and Governance Practice Location Review: Austria

 

 

As a current study in M&A Review (January 2016) reports, Austria realized roughly 330 handle 2015, a boost of 37 per cent from 2014. This makes 2015 one of the leading 10 years since 1988, with the duration spanning 2000 to 2007 being the strongest, peaking in 2005 with over 500 offers. For both public M&An in addition to private M&A activities a boost can be reported for 2015 and early 2016.

 

Offer activity and data

 

The stats published in M&A Review reveal that more than one-third of all 2015 offers were domestic, and that in cross-border offers the number of foreign investors acquiring Austrian targets slightly went beyond the number of Austrian financiers buying into the foreign markets. Vital sources for the boost in deal volume were distressed situations as well as the ongoing restructuring of banks.

In 2015 regional fundraising, after an all-time low of roughly 13 million in 2014, amounted to approximately 111 million, as the Austrian Private Equity and Venture Capital Organisation AVCO recently reported. It should be kept in mind however, that roughly 75 per cent of this was secured by Austria-based Speedinvest, which is focused on early phase investments.

 

The activity of company angels is steadily increasing, boosted by such institutional programs as the 22.5 million EAF Austria aws Business Angel Fund, intended at co-investments with company angels. This is a joint initiative of the European Investment Fund and the Austrian federal marketing bank Austria Wirtschaftsservice Gesellschaft mbH (aws).

 

Run for realty business

 

In 2015 and early 2016, activity in the real estate sector was exceptional. International investors have actually shown interest in noted Austrian property companies already for some time. Over the last few years, however, regional players typically outbid international financiers; however, the reverse has been seen recently.While a voluntary public bid based on an evaluation of almost 1.2 billion by Deutsche Wohnen for all shares in Conwert failed because the approval threshold of 50 per cent (under the Austrian Takeover Act) was not met, the Austrian Haselsteiner household sold its 24.7 per cent involvement in the company to Israeli financier Teddy Sagi for close to 230 million in Q2/2015, who in turn sold the stake to the German real estate company Adler for 285 million in Q3/2015. Adler cannot change the majority of the existing board, but succeeded in having it increased by one member suggested by Adler. According to media reports, the Austrian Takeover Commission is investigating whether Adler and other shareholders were acting in show, which would trigger a necessary bid obligation under Austrian takeover law.

 

After acquiring in overall 26 per cent in CA Immo through a mix of a block trade from Unicredit as well as a voluntary partial offer, Russian O1 Group this year concurred to sell its entire stake to Immofinanz for roughly 604 million. This is quite an incredible response to events in 2015: With the backing of O1, CA Immo launched a voluntary partial quote for 15 per cent in Immofinanz for up to 423 million, which reacted with the statement of a reverse (voluntary partial) bid for up to 29 per cent in CA Immo for up to 530 million, after losing out to O1 in the auction for the 16.8 per cent stake in CA Immo offered by Unicredit. As a defense step, Immofinanz decreased the limit that triggers a mandatory quote commitment from the statutory 30 per cent to 15 per cent, while CA Immo increased the bulk to eliminate supervisory board members to a 75 per cent majority, making it more challenging for Immofinanz to alter the supervisory board of CA Immo, had they acquired up to the recommended 29 per cent.

 

Immofinanz’s previous subsidiary BUWOG also decreased the formal control limit, however to only 20 per cent again, as a takeover precaution. The Austrian Takeover Commission validated in a ruling that no obligatory offer was activated in this case.The largest property deal in 2014, with a purchase price of 315 million, concerned the Millennium Tower in Vienna. The current owners, Morgan Stanley and CC Real, after completing a major renovation and modernization, are stated to be putting the property on the marketplace once again. The anticipated offer volume will amount to roughly 350 million. In late 2015 Morgan Stanley likewise acquired The Mall shopping center from Bank Austria (Unicredit) for around 500 million, making it the property deal of the year. Another significant property offer was the sale of IZD Tower by a joint endeavor of Signa Recap and the German insurance coverage group R+V to CBRE Global Investors (which acted for Asian financiers) in early 2016. In the hotel sector a number of offers can be reported: Starwood Hotels and Resorts sold 5-star hotel Imperial to Al Habtoor Group, a UAE based investment company, for around 70 million. A joint venture of Highgate Hotels and Goldman Sachs obtained K+K Hotelgruppe, with 10 hotels located throughout Europe, from its Austrian owners. Currently Austrian insurer Uniqua is reported to be auctioning the Vienna Sofitel for an expected purchase price of approximately 100 million.

 

Auctions for banks continue

 

The sale of personal business frequently occurs by auction. There is no specific legislation for such auction procedures. When a state-controlled seller is included, as with sales procedures for nationalized banks, the procedure ought to be transparent and non-discriminatory to offer for a correct defense, under EU state help policies, against any argument of unsuccessful bidders that the seller successfully granted a subsidy by offering to the prevailing bidder. In late 2014, the south-eastern European operations of Hypo Alpe Adria Bank, which had been fully nationalized in 2009, were offered to a consortium formed by the private equity financier ADVENT and the European Bank for Reconstruction and Development (EBRD). In early 2015, UK based Attestor Capital and private financier Patrick Bettscheider agreed to acquire a 99.78 percent stake in the previously nationalized Kommunalkredit Austria AG from state-owned Finanzmarktbeteiligung Aktiengesellschaft des Bundes for a purchase cost of as much as 150 million. In an initial action harmful assets were spun off to the bad bank KA Finanz. The discussed sale of the retail department of Unicredit to previous union bank BAWAG, which is majority-owned by Cerberus, did not continue. BAWAG itself is a continuous prospect to be sold. Additional transactions in the banking sector included Wiener Privatbanken SE s acquisition of the Austrian banking operations of Valartis Bank (Austria) AG through a possession deal. The EBRD invested 122 million in Raiffeisen’s Ukrainian Subsidiary Bank Aval, which resulted in the purchase of a 30 per cent stake, with Austrian based Raiffeisen International’s stake being decreased to 67 per cent. Raiffeisen International even more offered its Slovenian subsidiary Raiffeisen Banka to an Apollo-managed company.

 

The Austrian based credit card operator Card Complete Service Bank got DC Bank, another Austrian based credit card operator and issuer with operations in Austria, the Czech Republic, Poland and Slovakia, from its majority shareholder Unicredit. Another pattern that continued was the ongoing consolidation in the banking sector, with Volksbank Wien getting further local Volksbanken banks, or retail banking group Sparda merging its 2 entities Sparda Banken Austria Nord and Sparda Banken Austria S d.Generali Holding Vienna acquired a 37.5 per cent stake in Bonus Pensionskassen benefit listed Swiss Zurich Insurance Group, so that now each holds 50 per cent in the Austrian target which provides pension offers management services. Reward Pensionskassen itself obtained all shares in Victoria-Volksbanken Pensionskassen and Victoria-Volksbanken Vorsorgekasse from a group of sellers including German insurer ERGO, immigon portfolioabbau, Nieder sterreichische Landeshypothekenbank and Austrian private bank Schoellerbank.

 

Another popular offer was CEESEG, the parent of the Austrian Stock Exchange in addition to the Austrian Control Bank (OeKB) offering its 68.8 percent stake in the Budapest Stock Exchange to the Hungarian National Bank.

 

Targets in the retail industry

 

After a failed auction a couple of years ago (primarily due to issues that emerged in relation to a French subsidiary of the target, Lejaby), a group led by personal equity fund Quadriga Capital sold 100 per cent in the lingerie manufacturer and retailer Palmers to Austrian investors. SIGNA Retail, which obtained a number of retail business including the KaDeWe Group and Karstadt, got a 60 per cent stake in Outfitter, an online sports style retailer. Another deal in the car market was the sale of Auto Frey, one of Austria biggest car dealerships, to Catharina Pappas Group, another large Austrian car dealer.

 

Numerous handle product packaging market

 

Packaging is among the markets that has seen high deal volume. The most prominent offer involved France’s Wendel Group, which acquired a majority stake in Constantia Flexibles in late 2014. Throughout 2015 it offered a stake of 25 per cent to Herbert Turnauer Foundation for 100 million and a stake of 10 per cent to Munich personal equity financier Maxburg Capital Partners for 100 million. It is being reported that Wendel will continue to search for possible minority investors. Constantia Flexibles itself reported the effective takeover of the South African packaging company Afripack as well as the acquisition of Vietnamese aluminium manufacturer Oai Hung. One Equity Partners and private financier Christine de Castelbajac (the child of Herbert Turnauer) successfully sold the packaging company Duropack to the listed British packaging company DS Smith for approximately 300 million, representing a post-synergy EBITDA multiple of 5.7. Other handle the packaging industry include Dunapack Packaging, which is part of the Austrian Prinzhorn Group, buying Greek Viokyt Packaging, or the acquisition of the European tobacco product packaging and basic product packaging departments of MeadWestvaco to Swedish AR Packaging.

 

Public M&A

 

In 2015 and early 2016 the general public M&A activity had actually been considerable. A few of the transactions are covered above. Likewise, the boost in partial takeover quotes was notable. These objective to remain below the official control limit of 30 percent (unless reduced in the short articles of association as implemented by a number of Austrian business), which sets off a mandatory quote commitment for all shares in the target, or are even restricted to just 26 per cent, which is the ex-lege cap of exercisable voting rights (unless another shareholder holds voting rights in excess of that limit or a bid is released). Frequently, however, they are followed by subsequent bids, which generally trigger a compulsory offer. The following offer was different, however: In 2015 Airports Group Europe, an indirect subsidiary of IFM Global Infrastructure Fund, launched a voluntary partial quote to get 29.9 percent in Flughafen Wien AG, the operator of Vienna International Airport, and effectively obtained shares just below the 30 percent limit. Now in 2016 it released a voluntary partial quote to get an additional 10 percent for approximately 210 million, not following the rules of a necessary bid, based upon the argument that in spite of exceeding the official control threshold of 30 per cent no mandatory quote responsibility is set off since 2 investors are acting in a distribute, that in overall controls 40 percent of the ballot rights.

 

Personal equity

 

Another offer in the printing market was the acquisition of Austrian based druck.at by Netherlands based and listed Cimpress from the Austrian printing house DPI Holding for 23 million. An Austrian based worldwide player in the design and manufacture of sensors, ams, gotten Belgian CMOSIS for 20 million from the private equity firm TA Associates Management. The Austrian drilling equipment manufacturer Schoeller-Bleckmann Oilfield Equipment obtained a 68 per cent in Houston-based Downhole Technology for around US$ 103 million from the private equity firm Pelican Energy Partners.

 

In basic, we see an increased hunger of personal equity firms to buy smaller territories such as Austria, which is also real for some of the private equity heavyweights. Lots of popular names in the market are looking at Austrian targets and even if some of them have not concluded reported deals yet, we will definitely realize more in the coming years.

 

Other noteworthy offers

 

Z blin from the Lenz family, while Austrian construction group HABAU acquired Bilfinger MCE from German Bilfinger Berger in 2016, which in turn obtained MCE from Deutsche Beteiligungs GmbH in 2009 for 350 million. In 2015 HABAU also got the Austrian construction company LEN-BAU. Listed Austrian crane company Palfinger acquired a 75 per cent stake in Spanish crane distributor Mycsar Mulder from its creators, who continue to be investors with 25 per cent.By comparison to other sectors, energy had actually not been as active as in previous years: lectricit de France offered its 25 percent stake in Energie Steiermark AG to Australian investor Macquarie for around 270 million, which is substantially less than EDF paid when getting the stake. Austrian energy blue chip OMV obtained all shares in its gas trading subsidiary Econ-Gas from its former co-shareholders EVN, Wien Energie and Energie Burgenland.

 

An example in the electronic devices sector was the deal where Singaporean Delta Electronics International, a subsidiary of Delta Electronics, a noted Taiwan-based company, got an 85 percent stake in Austrian LOYTEC electronics, an Austria-based developer, manufacturer, and supplier of network facilities solutions for buildings and real estate automation and Innocontrol electronic devices GmbH, an Austria-based company of building management and control solutions. In the IT sector Austrian gaming company Novomatic accepted acquire around 53 percent in noted Ainsworth Game Technology from Len Ainsworth, the founder and bulk shareholder, for approximately 307 million.

 

About metals, voestalpine’s unique steel department got Shanghai based Advanced Tooling Tek and the Spanish Sermetal Group, specialized in the processing and sale of unique steel items for tool and mold-making. In chemicals Austrian Treibacher got 100 percent of Tribotecc, a leading manufacturer of metal sulphides, from United States Rockwood Specialties Group.

In the food and drinks sector Austrian based S. Spitz offered 49 percent of its subsidiary Power Horse Energy, an energy drink producer, to UAE financiers Vis Mundi and Levant Capital. Orkla Foods, through its wholly owned subsidiary FELIX Austria, got 100 percent of the shares in the Austrian bio food company Bioquelle. The Austrian subsidiary of BRF Brazil Foods had actually been included in a number of deals.

 

For sports and leisure, significant transactions consist of Red Bull getting a 50 percent stake in Beach Majors from its creator. The target is a sports promoter accountable for the Swatch Beach Volleyball Major Series. Another intriguing deal was Swiss Sportradar obtaining the core operations of The Sportsman Media Holding, such as the sport rights and marketing firm, the betting and video gaming business, the Internet-channel Laola1.tv and the production system Unas Media. From the Nordics, Swedish SkiStar AB bought 68 percent in the Austria ski resort operator St. Johanner Bergbahnen.Examples from the service sector include DHR International obtaining the Austrian HR expert and executive search specialist Neumann Leadership Holding from NYSE noted executive search firm CTPartners for US$ 26 million. GFKL Lowell strengthened its market position in Austria and Switzerland by acquiring collection and credit company IS Inkasso Service from Hannover Finanz.

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