The German government's Financial Market Stabilization Fund has announced its offer for all shares in the Hypo Real Estate bank. If shareholders do not sell shares voluntarily, the government can force them to do so.
Hypo Real Estate is one step nearer nationalization
Following the approval of the German financial oversight authority, the Fund (SoFFin) is offering 1.39 euros ($1.82) in cash per share, 10 percent over the statutory minimum price, and it says it wants to buy 100 percent of the shares, which could cost the government around 290 million euros. The offer starts with Friday's announcement and continues until May 4.
The takeover was made possible by a special law which came into effect on April 9 and which also allows the expropriation at the minimum price of any shareholdings which are not sold voluntarily. One shareholder, the US investor J.C. Flowers, heads a consortium which owns almost 22 percent and has said he does not want to sell.
"In view of the serious situation in which Hypo Real Estate Holding currently finds itself, we consider 1.39 euros to be an attractive price", said Hannes Rehm, Chairman of the SoFFin Management Committee.
"We are offering the premium of 10 percent in addition to the statutory price to ensure that the target of a 100 percent rescue purchase is a success in accordance with private law and to prevent any further measures having to be taken. It is in everyone's interest, the financial markets', the company's, its employees' and customers', to get this done promptly," he said.
The government has pumped over 100 billion euros into Hypo Real Estate and already owns 8.7 percent of the lender. The bank was seriously affected by the financial crisis, but the government believes that allowing it to collapse could have disastrous effects on the world's banking system.