JC Flowers set to close €1.1bn Hypo deal

The New York-based private equity firm says it plans to expand the German commercial real estate lender’s operations internationally, particularly in Japan, after shareholders tendered 24.13 percent of the firm’s stocks.

JC Flowers’ €1.1 billion ($1.71 billion) bid for a stake in German commercial real estate lender Hypo Real Estate is set to close next week after the private equity buyout firm acquired 24.13 percent of the firm’s shares.

The New York private equity firm said in a statement shareholders had tendered 48.5 million shares by 5pm Central European Time, and fully expected to meet the maximum stake of 24.9 percent once all shares were counted. A final share allocation will be announced Thursday.

JC Flowers first announced its offer to pay shareholders €22.50 a share – equivalent to a cash offer price of €1.1 billion – on April 16. It set a target of achieving a minimum 20 percent stake in Hypo through the voluntary tender offer.

Flowers is working with New York private equity real estate firm Grove International Partners and Japanese financial institution, Shinsei Bank. Hypo welcomed the approach “in principal” but the company’s management and supervisory board left the final decision to shareholders. Shares in Hypo were trading at more than €50 at the beginning of last year, but have since fallen by a quarter making them one of the worst performers on the German DAX.

Flowers said their offer represented a 20.5 percent premium to the three month weighted average. Hypo’s board said last month the offer could be beneficial for shareholders “interested in realising capital gains in the short term, or avoiding potential capital losses.”

In the statement yesterday, Flowers said it wanted to expand Hypo’s position including growth in German and international markets, but particularly in Japan. One significant opportunity, the firms said, was working with Shinsei Bank where it could help provide commercial real estate and public sector financing.

JC Flowers closed its second fund in 2007 on $7 billion. Grove closed its third fund, Redwood Grove, in June last year on $2 billion. In December 2007, the fund acquired the real estate subsidiary of Deutsche Bahn, Aurelis, in a €1.6 billion joint venture with construction services company Hochtief.