(Reuters) - German real estate firm TLG Immobilien (DE:TLGG) said on Sunday it is evaluating a potential merger with rival Aroundtown SA (DE:AT1) after buying a nearly 10% stake in Aroundtown for about 1.02 billion euros (£925.8 million).
TLG bought a 9.99% stake in Aroundtown from its largest shareholder, Avisco Group, and said the deal would immediately add to its funds from operations per share.
TLG, which had properties worth 4.6 billion euros in its portfolio at the end of June, also entered into an option agreement to acquire up to 4.99% additional stake in Aroundtown from Avisco.
"Today's announcement is the first step to enable the potential creation of a pan-European commercial real estate market leader, focused on Germany and the Netherlands and geared towards offices and hotel, which are the most attractive segments in commercial real estate," Avisco said in a statement. After this sale, its stake in Aroundtown reduced to 17%.
In a separate statement, Aroundtown said it welcomes TLG as an investor and resolved to start with the evaluation of a potential merger.
TLG's largest shareholder, Ouram, also issued a statement in support of a deal and said it was committed to back the company's management to advance the merger discussions with Aroundtown.
TLG said it intends to seek representation on Aroundtown's board as soon as possible.
UBS is serving TLG as its financial adviser on the deal and Sullivan & Cromwell is the company's legal adviser.