Berlin has made a takeover offer for troubled lender Hypo Real Estate. The bid was announced through the Financial Markets Stabilization Fund, SoFFin, which says it wants 100 percent control of the group.
Berlin says it's prepared to take full control of Hypo Real Estate by whatever means necessary
"The offer price of 1.39 euros per HRE share represents a premium of approximately 10 percent above the statutory minimum offer price of 1.26 euros," a SoFFin statement said.
The offer values HRE at about 290 million euros. That's about five percent of its value 12 months ago, and a fraction of the 102 billion euros it has received in credit lines and debt guarantees from the government and financial groups after a funding shortage at its Irish unit Depfa pushed the group to the brink of bankruptcy.
SoFFin said the takeover offer is aimed at "stabilising the German financial market", and warned that a collapse of HRE would cause economic damage similar to that triggered by the bankruptcy of US investment bank Lehman Brothers in September.
Stressing that the operation was a "voluntary public takeover offer to the shareholders of Hypo Real Estate", SoFFin said further details would be released "within the next few days" pending approval by the German stock market regulator BaFin.
Groundwork for nationalisation
US billionaire Christopher Flowers does not want to sell his stake in Hypo Real Estate
Analysts say the move represents another step towards the possible nationalisation of the battered lender.
The government took its first step towards taking control of HRE last month when it acquired an 8.7 percent stake in the company for 60 million euros.
A controversial new law signed this week by German President Horst Koehler allows the government to expropriate shareholders if voluntary efforts to secure stock fail.
That means Berlin could seize the shares of US billionaire Christopher Flowers, who heads an investment consortium that owns almost 24 percent of HRE.
Flowers has so far been resistant to the government's takeover plans, saying Hypo Real Estate should receive “equal treatment” to other troubled German banks.
Following the passage of the law, Flowers said he may seek “legal recourse” to safeguard the interests of investors.