Höme Sweet Höme

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What's going on?

Looks like all that alone time during lockdown was quite enough for Vonovia: the German real estate giant agreed to bring rival Deutsche Wohnen into the fold in a $22 billion acquisition.

What does this mean?

The residential real estate market is popping off across much of the world right now, and Germany is no exception. So it’s not surprising that Vonovia – the country’s biggest residential landlord – should be looking for a bigger slice of the strudel with its third attempted takeover of slightly smaller competitor Deutsche Wohnen.

Despite its size, Vonovia currently only controls less than 1% of Germany’s residential real estate market – or around 350,000 apartments. And considering half the country’s population rent rather than own, the opportunity for growth is massive. So is the deal, for that matter: it’s Europe’s biggest merger so far this year.

Why should I care?

For markets: This is an expensive neighborhood.

Vonovia’s bid for Deutsche Wohnen valued the company 18% higher than it was worth last week, so it’s no wonder that the firm’s stock price jumped 16% on Tuesday. But Vonovia’s investors were less impressed, sending its shares down 6%. That’s not an uncommon reaction to this sort of big-ticket deal: investors often worry that the company’s either overpaid for the acquisition, is taking on too much debt, or will struggle to integrate the new firm successfully.

The bigger picture: Germany’s big summer blowout.

Vonovia’s announcement comes just as things are looking up for Europe’s biggest economy: a major monthly survey of 9,000 German companies on Tuesday showed business morale at its highest in two years (tweet this). It’s the latest sign that economic activity is picking up across the continent.

Originally posted as part of the Finimize daily email.

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