Mobiles Menu Mobiles Menu Close

4 Scope of Consolidation and Business Combinations

All in all, and including Vonovia SE, 736 companies (Dec. 31, 2020: 588) – thereof 441 (Dec. 31, 2020: 285) domestic companies and 295 (Dec. 31, 2020: 303) foreign companies – have been included in the consolidated financial statements as of December 31, 2021. In addition, joint activities were performed with two domestic companies (Dec. 31, 2020: two). In addition, 25 (Dec. 31, 2020: four) domestic companies and one (Dec. 31, 2020: one) foreign company were included as joint ventures and five domestic companies (Dec. 31, 2020: zero) and two (Dec. 31, 2020: two) foreign companies were included as associates accounted for using the equity method.

Three (Dec. 31, 2020: three) foreign companies are no longer included in the scope of consolidation as they are no longer considered to be material. These companies are shown as non-consolidated affiliated companies.

For all subsidiaries included in the consolidated financial statements, the reporting date is December 31.

The list of Vonovia shareholdings is appended to the Notes to the consolidated financial statements as an integral part thereof.

Companies that have made use of the exemption provision set out in Section 264 (3) of the German Commercial Code (HGB) are marked accordingly in the list of shareholdings.

The year-over-year changes in the consolidated companies as of December 31, 2021 result from 166 acquisitions, 14 mergers, an accrual, a liquidation and two sales. The change in joint ventures results from 23 acquisitions and two liquidations; the change in associates results from five acquisitions.

Acquisition of Deutsche Wohnen SE

On June 23, 2021 Vonovia SE, Bochum, published the offer document regarding its takeover offer to the shareholders of Deutsche Wohnen SE, Berlin, for the acquisition of the no-par-value shares held by them in Deutsche Wohnen SE against payment of a cash consideration of € 52.00 per share. The acceptance period for the takeover offer expired at midnight (local time in Frankfurt am Main) on July 21, 2021 (reference date).

By the end of the acceptance period, the takeover offer had been accepted for a total of 105,336,403 shares in Deutsche Wohnen. This corresponded to approx. 29.27% of the share capital and voting rights of Deutsche Wohnen.

As of the reference date, Vonovia SE directly held a total of 66,057,759 shares in Deutsche Wohnen that were purchased either on the market or by way of individual agreements. This corresponds to around 18.36% of the share capital and voting rights of Deutsche Wohnen SE.

On the reference date, the total number of Deutsche Wohnen shares to be taken into account for the minimum acceptance threshold therefore came to 171,394,162, corresponding to around 47.62% of the share capital and voting rights of Deutsche Wohnen SE.

The closing condition described in the offer of reaching the minimum acceptance threshold of 179,947,733 Deutsche Wohnen shares (corresponding to around 50% of the current share capital of Deutsche Wohnen SE) had not been reached as of the acceptance deadline. The closing condition had therefore definitively failed.

As a consequence of the definitive failure of this closing condition, both the takeover offer had lapsed and the agreements entered into as a result of the acceptance of the takeover offer ceased to exist. They were not executed. The 105,336,403 shares in Deutsche Wohnen that had been submitted were returned.

In addition, as of the reporting date, the bidder held financial instruments relating to 12,708,563 Deutsche Wohnen shares on the basis of a share purchase agreement concluded with Deutsche Wohnen SE but not yet executed. This corresponds to around 3.53% of the share capital and voting rights of Deutsche Wohnen SE. As the takeover offer was not successful, the condition precedent of the share purchase agreement has occurred and the share purchase agreement has been consummated.

This means that Vonovia SE held a total of 78,766,322 shares in Deutsche Wohnen as of July 21, 2021. This corresponds to approx. 21.89% of the share capital and voting rights of Deutsche Wohnen. As a result, Vonovia had a significant influence with effect from July 21, 2021.

As a result, the shares in Deutsche Wohnen SE were classified as an associate from this point onwards. For the period from July 21, 2021 until the acquisition date on September 30, 2021 profit shares of € 0.8 million were included in Vonovia’s income statement as net income from non-current financial assets accounted for using the equity method. This profit share corresponds to an average pro rata interest of 29.8% and reflects the proportion for which shares in the profit for the period under review existed. As part of Deutsche Wohnen’s inclusion as an associate as of July 21, 2021 the assets and liabilities of the Deutsche Wohnen Group, and in particular its real estate assets, were remeasured.

On August 1, 2021 Vonovia SE and Deutsche Wohnen SE announced that the business combination agreement had been revised and another offer would be published. The publication of another offer document was subject to approval for another timely public takeover offer made to the shareholders of Deutsche Wohnen SE being granted to Vonovia SE by the German Federal Financial Supervisory Authority (BaFin). The approval was granted on August 5, 2021.

Following the announcements made on August 1 and August 5, 2021 Vonovia SE announced the start of another voluntary public takeover offer for all outstanding shares in Deutsche Wohnen SE on August 23, 2021 publishing a corresponding offer document. As described in the offer document that was published, Vonovia offered cash consideration of € 53.00 for each share in Deutsche Wohnen. A minimum acceptance threshold of 50% was also a key closing condition. The offer period originally started on August 23 and ended at midnight (CEST) on September 20, 2021.

Up until the publication of the new offer document, Vonovia SE had acquired a further 29,201,317 shares in Deutsche Wohnen SE either on the market or by way of individual agreements. At this point in time, the total number of shares in Deutsche Wohnen held by Vonovia SE came to 107,967,639, corresponding to around 29.99% of the share capital and voting rights of Deutsche Wohnen.

On September 13, 2021 Vonovia SE announced that it would be waiving all offer conditions of the voluntary public takeover offer for the shares in Deutsche Wohnen SE. This was consistent with the offer document published on August 23, 2021 and was coordinated with Deutsche Wohnen SE. This move also resulted in the minimum acceptance threshold ceasing to apply. This meant that the offer was no longer subject to any further closing conditions; the acceptance period was extended by two weeks, meaning that it ended at midnight (CEST) on October 4, 2021. The further acceptance period started on October 8 and ended at midnight (CEST) on October 21, 2021.

Up until September 30, 2021 Vonovia SE had acquired a further 33,500,856 shares in Deutsche Wohnen either on the market or by way of individual agreements, and 42,999,948 shares in Deutsche Wohnen had been submitted during the acceptance period for the public takeover offer. All in all, this corresponds to a share of around 50.38% in the share capital entered in the commercial register on September 30, 2021 less 3,362,003 shares held by Deutsche Wohnen SE, for which the voting rights cannot be exercised.

The acquisition date on which Vonovia SE obtained control of Deutsche Wohnen SE was September 30, 2021. This transaction shall be treated as a business combination in accordance with IFRS 3.

The new valuation of the existing shares in Deutsche Wohnen SE required in connection with the first-time consolidation resulted in income of € 87.5 million. This was recognized in other operating income.

By the end of the further acceptance period at midnight CEST on October 21, 2021 the takeover offer had been accepted for a total of 198,463,161 shares in Deutsche Wohnen.

Since the acquisition of shares within the further acceptance period were effected under exactly the same conditions as in the first acceptance period and the two business transactions were related in terms of content and timing, these transactions are to be regarded as linked transactions. All in all, 87.36% of the share capital entitled to voting rights was included in the recognition of the business combination.

On October 14, 2021 Vonovia also converted convertible bonds of Deutsche Wohnen SE previously acquired on the market into 7,796,827 Deutsche Wohnen SE shares in a transaction not related to the takeover offer.

Therefore, the total number of shares entitled to voting rights held by Vonovia in Deutsche Wohnen SE as of December 31, 2021 amounts to 347,728,483. Of these shares, 198,463,161 were tendered as part of the takeover offer, 141,468,495 were acquired on the market or by way of individual agreements and 7,796,827 were added through the conversion of acquired convertible bonds. As of December 31, 2021 this represents 87.60% of the share capital entitled to voting rights. Deutsche Wohnen SE also holds a further 3,362,003 shares as own shares.

The following tables summarizes the development of the share capital shareholding in Deutsche Wohnen SE.

Development of the shareholding in Deutsche Wohnen SE

until date

number of shares

share quota

Market acquisitions

Jul. 21, 2021

66,057,759

Acquisition through conditional purchase agreement

Jul. 21, 2021

12,708,563

Date of inclusion using the equity method

Jul. 21, 2021

78,766,322

21.89%

Market acquisitions

Aug.23, 2021

29,201,317

Market acquisitions

Sept. 30, 2021

33,500,856

Shares tendered during the offer phase

Sept. 30, 2021

42,999,948

Acquisition date

Sept. 30, 2021

184,468,443

50.38%

Shares tendered during the extended offer phase

Oct. 21, 2021

155,463,213

Shares recognised in course of the business combination

339,931,656

87.36%

Conversion of convertible bonds held

Oct. 14, 2021

7,796,827

Reporting date

Dec. 31, 2021

347,728,483

87.60%

As part of the provisional purchase price allocation, the total consideration of the acquisition comprises the following:

Acquisition of Deutsche Wohnen – Total consideration

in € billion

Fair value of shares held as of September 30, 2021

7.5

Net cash purchase price component for shares tendered

10.5

Total consideration

18.0

The allocation of the total purchase price to the acquired assets and liabilities (PPA) of the Deutsche Wohnen Group as of the date of first-time consolidation is based on the financial statements of the Deutsche Wohnen Group as of September 30, 2021 and on the known necessary adjustments to the fair values of the assets and liabilities. As the acquisition date fell so close to the date on which the financial statements were prepared, the allocation was only provisional.

The assets and liabilities assumed in the course of the business combination had the following preliminary fair values as of the date of first-time consolidation:

Acquisition of Deutsche Wohnen – Fair values of assets and liabilities assumed in the course of the business combination

in € billion

Investment properties

28.2

Financial assets

1.0

Cash and cash equivalents

0.8

Assets held for sale

2.2

Fair value of other assets

1.4

Total assets

33.6

Provisions

0.5

Non-derivative financial liabilities

11.2

Deferred tax liabilities

5.4

Non-controlling interests

0.5

Fair value of other liabilities

0.7

Total liabilities

18.3

Fair value net assets

15.3

Consideration

18.0

Non-controlling interests

2.0

Goodwill

4.7

The non-controlling interests are included based on the share of the assets and liabilities of Deutsche Wohnen SE that have been recognized.

The goodwill represents synergies from the future integration of the Deutsche Wohnen Group, in particular through the shared administration and management of the respective residential units. The goodwill was only provisionally allocated to one or several cash-generating units due to the still provisional allocation of the consideration to assets and liabilities.

In general, the discounted cash flow (DCF) method was used to measure investment properties. Under the DCF methodology, the expected future income and costs of a property are forecast over a detailed period and discounted to the date of valuation as the net present value. The measurement was performed at the level of a homogeneous valuation unit, meaning that it is consistent with the principle of individual valuation.

The fair value of the loans under the item non-derivative liabilities was determined as the sum of the amounts of future cash flows discounted to the acquisition date using a DCF method. The contractually agreed maturities and the interest and repayment schedules were used to determine the future cash flows of the loans. The yield curve used in the DCF calculation to discount the cash flows consists of a risk-free base curve and a premium for the risk of non-performance (“risk spread”).

Due to the change of ownership of more than 50% of the subscribed capital/voting rights in Deutsche Wohnen SE, tax loss carryforwards of Deutsche Wohnen SE and a small number of subordinated companies have been lost with effect for the future. Deferred tax assets were recognized on the company’s loss carryforward and offset against deferred tax liabilities. This offsetting was reversed and the deferred tax assets were no longer recognized due to the loss carryfowards that were eliminated as part of the PPA. In addition, deferred taxes that were not recognized due to the initial recognition exemption (also initial difference exemption) were recognized as part of the business combination. An initial recognition exemption refers to an exceptional scenario in which a deferred tax liability/deferred tax asset cannot be recognized if it results from the first-time recognition of an asset or liability, the underlying transaction is not a business combination and, at the time the transaction is executed, neither the earnings before tax recognized in the balance sheet nor the taxable net income are affected. The corresponding adjustments were made under deferred tax liabilities.

The measurement of the acquired joint ventures and associates under the item fair value of other assets took place using a DCF methodology based on the planning of the respective companies and the use of company-specific weighted average costs of capital (WACC).

The acquired brand rights in the area of nursing care, i.e., “Pflege & Wohnen Hamburg” and “Katharinenhof” under the item fair value of other assets, were measured using the relief-from-royalty method. This method is based on the assumption that the value of this intangible asset will correspond to the present value of the royalty fees saved after tax that are attributable to the asset concerned.

The multi-period excess earnings method (MEEM) was used to measure the existing care agreements under the item fair value of other assets. Using this method, the fair value of intangible assets is calculated as the residual value following deduction of hypothetical payments for the use of so-called “supporting assets.” In the process, it is assumed that a company that only owns the measurable intangible asset itself either licenses, leases or rents all other supporting assets necessary for the company’s operations. As such, fictitious usage fees for all supporting assets (“contributory asset charges [CACs]”) need to be determined and deducted as part of the MEEM.

As of September 30, 2021 the Deutsche Wohnen Group comprised 163 fully consolidated companies. The Deutsche Wohnen Group also held interests in 23 joint ventures and four associates. In addition to residential property management as its core business, the company’s business activities include nursing and assisted living, disposals/acquisitions and new construction/development as core business areas. In addition to its core business areas, the Deutsche Wohnen Group offers property-related services, such as property energy-efficiency management, the multimedia business and technical facility management, via subsidiaries or strategic shareholdings.

Starting on September 30, 2021 the Deutsche Wohnen Group contributed € 971.0 million to income, as well as € 262.9 million to profit for the period. This amount includes income of € 68.8 million from the business areas nursing and assisted living.

If the Deutsche Wohnen Group had already been fully included in the consolidated Group as of January 1, 2021 it would have contributed to the income in the amount of € 2,297.4 million and to profit/loss for the period in the amount of € 1,034.9 million.

Out of the trade receivables that were acquired, an amount of € 20.1 million is likely to have been uncollectible at the time of acquisition. The gross amount of the acquired trade receivables was € 80.9 million. The net carrying amount, which corresponds to the fair value, was € 60.8 million.

In the 2021 fiscal year, transaction costs related to the acquisition of the Deutsche Wohnen Group in the amount of € 210.8 million were recognized in other operating expenses affecting net income. € 89.0 million of this amount is recognized in other operating expenses, € 109.4 million in other financial result and € 12,4 million in interest expenses.

Acquisition of H&L Immobilien GmbH

On December 2, 2020 Vonovia SE announced that it had signed a contract concerning the acquisition of a 94.9% stake in H&L Immobilien GmbH (renamed Fjord Immobilien GmbH with an entry in the commercial register being made on February 8, 2021), Kiel, Germany, (“H&L”) via its wholly owned subsidiary Deutsche Annington Acquisition Holding GmbH.

The acquisition date, the time at which Vonovia SE obtained control of H&L, was December 30, 2020. This was the date on which the offer was settled. This transaction shall be treated as a business combination in accordance with IFRS 3.

As part of the purchase price allocation, the consideration transferred for the business combination comprises the following:

Acquisition of H&L Immobilien GmbH – Total consideration

in € billion

Net cash purchase price component

93.2

Total consideration

93.2

The allocation of the total purchase price to the acquired assets and liabilities (PPA) of H&L as of the date of first-time consolidation is based on the financial statements of H&L as of December 31, 2020 and on the known necessary adjustments to the fair values of the assets and liabilities. The assets and liabilities assumed in the course of the business combination had the following fair values as of the date of first-time consolidation:

Acquisition of H&L Immobilien GmbH – Fair values of assets and liabilities assumed

in € million

Investment properties

123.0

Trade receivables

0.1

Cash and cash equivalents

2.2

Fair value of other assets

0.1

Total assets

125.4

Provisions

0.5

Non-derivative financial liabilities

36.6

Deferred tax liabilities

26.1

Fair value of other liabilities

3.4

Total liabilities

66.6

Fair value net assets

58.8

Consideration

93.2

Goodwill

34.4

There were no changes compared with the preliminary allocation of the total consideration as of December 31, 2020.

The valuation of the investment properties is based on the fair value determination as of December 31, 2020 which was carried out by CBRE on behalf of Vonovia.

The fair value of the loans was determined as the sum of the amounts of future cash flows discounted to the acquisition date using a discounted cash flow (DCF) methodology. The contractually agreed maturities and the interest and repayment schedules were used to determine the future cash flows of the loans. The yield curve used in the DCF calculation to discount the cash flows consists of a risk-free base curve and a premium for the risk of non-performance (“risk spread”).

The goodwill represents synergies from the future integration of H&L, in particular through the shared administration and management of the respective residential units in the North region. It was allocated to the cash-generating unit North business area.

In the 2021 fiscal year, H&L contributed € 5.8 million to income, as well as € 10.6 million to profit for the period.

The gross carrying amount of the acquired trade receivables was € 0.4 million. Transaction costs of € 0.0 million have been recognized in connection with the transaction in the 2021 fiscal year.