THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN, SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF APPLICABLE LAWS OR REGULATIONS
 

AROUNDTOWN AND TLG IMMOBILIEN AGREE ON ESSENTIAL NON-BINDING TERMS FOR THEIR POTENTIAL MERGER
 

- Aroundtown to make a voluntary offer in shares for all outstanding shares in TLG to optimise transaction impact

- The combination is expected to be NAV and FFO accretive to shareholders of both companies on the basis of ongoing preliminary synergy assessment

- Exchange ratio to be determined on the basis of the EPRA NAVs per share of both companies

- Best-in-class governance of the company following a successful merger in principle agreed, with TLG management further strengthening the existing Aroundtown management team

- Significant progress in ongoing negotiations towards agreeing final binding terms of the transaction, which are expected to be announced before year end
 

27 October 2019.

Following Aroundtown SA's ("Aroundtown") announcement on 1 September 2019 on the evaluation of a potential merger with TLG Immobilien AG ("TLG"), both companies have analysed the potential merger and the best possible way to achieve a successful combination of their businesses from an economic, financial, operational, legal and tax standpoint. Aroundtown's Board of Directors resolved yesterday the execution of a non-binding term sheet with TLG, thereby determining the essential terms and conditions of a potential merger of the two companies.

The now agreed term sheet provides for a merger by way of a voluntary public offer by Aroundtown for all shares in TLG against a consideration consisting of new shares issued by Aroundtown. The exchange ratio will be determined on the basis of Aroundtown's and TLG's EPRA NAV per share, subject to statutory minimum price rules. The newly issued shares would be created under Aroundtown's existing authorized share capital.

Aroundtown expects to announce the intention to formally launch an offer to the shareholders of TLG before the end of the year.

In connection with the exchange offer, Aroundtown and TLG will further negotiate and are expected to enter into a business combination agreement ("Business Combination Agreement"). The Business Combination Agreement is expected to set out Aroundtown's and TLG's common understanding as to, among other things, the strategy and structure of the combined company, the offer process, synergies potential, the future composition of the corporate bodies of Aroundtown and TLG and the integration process.

The combination is expected to result in the creation of one of the largest listed commercial real estate company in Europe with a focus on offices and hotels predominantly in Germany and the Netherlands, and, through its strategic holding in Grand City Properties SA, in residential. Upon successful completion of the transaction, 47% of the combined portfolio will be offices, 21% will be hotels, and over 85% located in Germany.

Due to the similar business models and portfolio focus, Aroundtown expects to achieve substantial synergies as a result of this transaction creating incremental value to shareholders. Based on the preliminary analysis, the combination is expected to be FFO and NAV accretive for both sets of shareholders, and will enhance the organic and external growth prospects of the combined company.

Further work on synergies is ongoing and will be disclosed in due course. Both companies see significant synergies potential from the operations and capital structure. The combined company is expected to operate at higher profitability, reducing the cost base from operational as well as from administrative expenses, further strengthening a best in class platform through the combination of the teams of both entities. The strengthened balance sheet, scale, quality and diversification of the combined company will accelerate the goal of reaching an A- rating, resulting in access to capital markets at improved financing term, both cost and maturity. The combined company will have best-in-class management expertise to unlock the upside potential of the portfolio value-add potential. The combination of the development expertise and balance sheet strength of the enlarged group will facilitate the acceleration of the development pipelines of Aroundtown and TLG, driving further value creation for the company. In addition, we expect economies of scale from the combination of both portfolios and teams, and an improved risk profile through exposure to a larger and more diversified portfolio, increased market capitalisation and liquidity.

Upon Aroundtown holding more than 50% of all shares in TLG ("Holding Threshold"), it is contemplated that Aroundtown introduces a revised governance structure consisting of a management body (comité de direction) and the Board of Directors. Aroundtown's management body will consist of five members, and its board of directors of six to seven, with its chairman being entitled to a casting vote. The CEO and additional two to four management body members are to be nominated by Aroundtown subject to the Holding Threshold. TLG is entitled to nominate the CFO subject to the Holding Threshold and an additional member of the management team upon reaching a holding of 66% of all TLG shares. One of the members nominated by TLG would carry the title of Co-CEO. Upon reaching the Holding Threshold, the Chairman of Aroundtown's board of directors would be nominated by TLG. Three members of such board are proposed to be independent.

Aroundtown's current management board members and executive members of the Board of Directors have confirmed their long term commitment to continue managing the combined company as members of the respective governing bodies after completion of the transaction.

The Advisory Board of Aroundtown will stay unmodified, with the continuous leadership of the chairman Dr Gerhard Cromme and the vice chairmen Mr Gabay.

The combined company will keep its seat in Luxembourg and is contemplated to do business under a new name to be defined jointly by Aroundtown and TLG. The operational headquarters will be in Berlin, Germany.

Shmuel Mayo, CEO of Aroundtown said "This transaction will be accretive to our shareholders, in terms of FFO per share, value, portfolio quality and strategic positioning, as it allows Aroundtown access to a high quality German commercial real estate portfolio with significant embedded growth, very tangible synergies and combined best in class management capabilities. The enlarged company will be able to deliver further value creation and growth for our shareholders."

Gerhard Cromme, Chairman of Aroundtown's Advisory Board commented "We are excited about the progress in our negotiations and about the commonalities and shared values we have identified. The strategic, operational and financial merits of merging the two companies are more palatable to all of us as our work progresses. We are confident now to conclude our conversations before year end, andwe are committed to working towards the consolidation of the leading European commercial property company in terms of scale, portfolio attributes, returns, risk, management and governance."

At this stage, there is no assurance that a binding definitive agreement on the merger will be reached or that a transaction will be consummated. The signing of any legally binding agreement and the decision of Aroundtown to launch a takeover offer is subject to the agreement of both parties with respect to all terms and conditions of a business combination, the final analysis of the synergies, due diligence, and the approval of any definitive agreement by Aroundtown and TLG.

About the Company

Aroundtown SA (symbol: AT1), trading on the Prime Standard of the Frankfurt Stock Exchange, is the largest listed and highest rated (BBB+ by S&P) German commercial real estate company. Aroundtown invests in income generating quality properties with value-add potential in central locations in top tier European cities mainly in Germany/NL.

Aroundtown SA (ISIN: LU1673108939) is a public limited liability company (société anonyme) established under the laws of the Grand Duchy of Luxembourg, registered with the Luxembourg Trade and Companies Register (Registre de Commerce et des Sociétés, Luxembourg) under number B217868, having its registered office at 1, Avenue du Bois, L-1251 Luxembourg, Grand Duchy of Luxembourg.

Contact

Timothy Wright

T: +352 285 7741

E: [email protected]

www.aroundtown.de

DISCLAIMER

THIS ANNOUNCEMENT DOES NEITHER CONSTITUTE AN OFFER TO EXCHANGE OR PURCHASE NOR THE SOLICITATION OF AN OFFER TO EXCHANGE OR PURCHASE ANY SECURITIES. MOREOVER, THIS ANNOUNCEMENT DOES NEITHER CONSTITUTE AN OFFER TO BUY NOR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN AROUNDTOWN SA. AROUNDTOWN SA HAS NOT YET MADE A DECISION ON ITS INTENTION TO MAKE ANY PUBLIC TAKEOVER OFFER AND ANY TERMS OF SUCH INTENTION TO LAUNCH A PUBLIC TAKEOVER OFFER WILL BE SUBJECT TO AN OFFER DOCUMENT TO BE APPROVED BY GERMAN FEDERAL FINANCIAL SUPERVISORY AUTHORITY (BUNDESANSTALT FÜR FINANZDIENSTLEISTUNGSAUFSICHT). AROUNDTOWN MAY NOT MAKE A DECISION TO INITIATE A PUBLIC TAKEOVER OFFER AT ALL.
THE SECURITIES MENTIONED IN THIS ANNOUNCEMENT HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR IN IN ANY OTHER JURISDICTION, WHERE TO DO SO WOULD BE A VIOLATION OF APPLICABLE LAW. THERE WILL BE NO PUBLIC OFFERING OF SECURITIES OF AROUNDTOWN SA IN THE UNITED STATES.

THIS ANNOUNCEMENT MAY CONTAIN PROJECTIONS OR ESTIMATES RELATING TO PLANS AND OBJECTIVES RELATING TO OUR FUTURE OPERATIONS, PRODUCTS, OR SERVICES, FUTURE FINANCIAL RESULTS, OR ASSUMPTIONS UNDERLYING OR RELATING TO ANY SUCH STATEMENTS, EACH OF WHICH CONSTITUTES A FORWARD-LOOKING STATEMENT SUBJECT TO RISKS AND UNCERTAINTIES, MANY OF WHICH ARE BEYOND THE CONTROL OF AROUNDTOWN SA. ACTUAL RESULTS COULD DIFFER MATERIALLY, DEPENDING ON A NUMBER OF FACTORS. IT IS POSSIBLE THAT AROUNDTOWN SA WILL CHANGE ITS ASSUMPTIONS REFLECTED IN THIS ANNOUNCEMENTS.