Dear ladies and gentlemen, welcome to the analyst and investor call for Vonovia SE. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulty seeing the conference, please press star key followed by zero on your telephone for operator assistance. May I now hand you over to Rene, who will lead you through this conference. Please go ahead, sir.
Thank you, Judith, and welcome everyone to our conference call on acquiring the majority stake in Hembla from Blackstone. I'm sure you have seen our ad hoc and press releases this morning, and maybe you have already had a chance to take a look at the presentation. It can be found on our website in the section Latest Publications. Our CEO, Rolf Buch, and our CFO, Helene von Roeder, will lead through the presentation and then open up for Q&A. At this point, let me hand you over to Rolf now.
Okay, thank you very much, Rene, and also from me, a warm welcome to everybody. I'm on page two of the presentation. Of course, what we are doing here is in line with our strategic rationale. We started to be in Sweden with the acquisition of Victoria Park. We believe that also in Sweden, like in all other markets, residential is all about scale. The acquisition of the majority of Hembla is in this respect, the normal logical next step and a huge opportunity for our company. We will have now together, Hembla and Victoria Park, be the biggest residential player in Sweden with an unparalleled exposure to the three big cities in Sweden. As you know, we are focusing always on big cities. Of course, this is probably the best combination you can get.
The two company has a very good complementary fit, so we are now in Malmo, Gothenburg, and of course, as you will see in the slides, and biggest portion is in Stockholm. The transaction is accretive on Group FFO per share and adjusted NAV per share. I think Helene will talk about this. This will have no impact on rating or rating outlook. We can realize the estimated operational and financial synergies of SEK 30 million already on the basis of the 69% voting rights acquired from Blackstone. This, I think is the next step for successful execution of our European strategy. To remind you, we continue in Austria to run a scalable business model there after we have integrated now BUWOG and conwert. In Sweden, we will do now the integration of these two companies, and then we'll go on with further acquisitions and consolidation.
In France, we actively engage with relevant players, but this will probably take some time. In the Netherlands, we wait for opportunities. On the next page, you'll see a little bit, again, what happened. In Q4 2017, I think we announced and told you to the market that we want to proceed to European extension strategy. At this time, we said Austria, Sweden, France, and Netherlands. We also signed in the Q4 2007, a memorandum of understanding with France. We bought BUWOG, and we made a tender offer for BUWOG to ensure the scale in Austria. In Q2 2018, we then obviously made the tender offer for Victoria Park and now in Q4, we bought a smaller portfolio, which is actually what Victoria Park was big in 2003, had units in Sweden. We acquired a small company in France.
This is the next big step, and this will lead to market leadership in Sweden. Also this will give roughly 15% of our portfolio is now outside Germany, which I think is also an important message. We don't disclose the detailed figures on Victoria Park, but on page 4, you can see that we have been very successful in Victoria Park over the last year. This success actually make us strong beliefs that we now understand very well the Swedish market and that we are ready for the next step. As you can see, our rent has grown by 4%. Our NAV per share has grown by 20%. Pretty successful, and we are very happy with the management team and the experience we have made in Sweden up to now. Hembla is a major Swedish residential player, slightly bigger than Victoria Park.
Asset value of EUR 3.1 billion. Owned by a very good management. Very strong KPIs in the past. Some of you probably know that I used to be in the supervisory board of D. Carnegie & Co, which is now Hembla. I know the company very well, and I had to step down before we acquired Victoria Park. Still from this past knowledge, I have good knowledge, and I think it's a very interesting company with a very good portfolio quality because the portfolio is mainly based in Sweden. Actually, Victoria Park and Hembla together will deliver the market lead in Sweden. Probably some of you will remember our top line on the IPO presentation. This is the consolidated data of the German market. Here, we have built now the consolidated data of the Swedish market.
You can see on page six that there's a few companies left, which are not listed, but which are owned still Pension funds. I think even smaller portfolios, but also bigger portfolios, there will be a future consolidation possibilities in Sweden. Not tomorrow, don't be afraid. Now we have to integrate. On the long run, all ready to go today. Hembla and Victoria Park, they have a rough market share of 2.1%. The market share in Sweden is a little bigger than our market share in Germany. If you look on the portfolio, it's actually a perfect fit. Hembla was concentrated on Stockholm. Victoria Park was concentrated on Stockholm, Malmö, and Gothenburg. Now we have a portfolio which has actually three quarters in Stockholm. Of course, Stockholm is the most attractive region, Gothenburg and Malmö.
I would say with this transaction, the portfolio quality of Vonovia in Sweden has been improved. With this, I hand over to Helene.
Hi. Good morning. Looking at the transaction criteria, as Rolf already mentioned, it fulfills all of our acquisition criteria. As such, we're looking at a EUR 0.12 increase in per share on a pro forma basis for 2020 for Group FFO, and also accretive from an adjusted NAV view of EUR 0.16. If we look at our rating impact, we don't expect any negative rating outlook as a result of the transaction, neither using our 50/50 acquisition criteria, nor in what we are planning to do by financing the structure at this point with all debt. I think what needs to be said, though, is you have observed that we have changed from FFO1 to Group FFO, and as a result, we will need to revisit our acquisition criteria.
At this point in time, we are using our old ones, but just a preemptive notice to everybody, we will be coming out with new acquisition criteria at some point in due course. Moving on to the next slide. Just looking at the transaction. What are we doing? We're purchasing the Hembla shares from Blackstone at a share price of SEK 215, That's roughly EUR 1.142 billion in total. We will be settling, That's music to the ears of a CFO, this purchase price predominantly in EUR, I'm saving money. The implied enterprise value of Hembla is approximately EUR 3.5 billion. If you look at the implied premium, it's roughly the same across all measures, roughly somewhere 11.5% premium to spot, with a 18.6% premium to last reported NAV.
As you know, NAV in Sweden as a result of the ongoing modernization measures are going up. We're looking at an increased NAV most likely in 2019. This morning we signed the SPA with Blackstone, and if we complete that transaction, that is subject to a Swedish antitrust, it will trigger a mandatory bid for Vonovia. We will expect to be out towards the end of the year with a mandatory offer to all minority shareholders. We will not be implying a minimum acceptance threshold, whatever comes our way, we are happy takers. At this point in time, I mentioned earlier this transaction with Blackstone, we will be definitely doing all debt. We will be taking the equity we raised in May preemptively. As you may remember, we said that is predominantly for transactions we see coming up in Sweden to finance the transaction.
Once we look at the minority takeout, we reserve all options open. It could be all debt, it could be equity, it could be a hybrid. It depends on how the company shapes up, how many minorities we get, what valuations we get. This I will leave open and we'll decide at a later stage whatever makes most sense. If I look at the transaction timeline, as I said, this morning, we signed the SPA with Blackstone. Somewhere October, November, we will get our merger control clearance, hopefully, from the Swedish antitrust authorities. At that point, we have four weeks then to launch the mandatory bid, and there's a four-week acceptance period for shareholders. Somewhere around December 19th, we hope to have the expected end of acceptance period and have this transaction done and dusted by the end of the year.
I think that it's an overture of.
Thank you very much, Helene. What you see in this transaction, I think this transaction should not come for you as a big surprise, probably in timing, but not in the transaction itself. You can see here again that we develop a strategy, we communicate it to the market, and then we are going to execute it step by step. This will take several years. The strategy announced in 2017 is now one step further. It's not the end of the strategy. I think there's still a lot of things to do. Here, together with Victoria Park and Hembla, we are becoming the largest landlord in Sweden. We are now in Sweden, the Vonovia of Sweden, and with a very good exposure, a very clear portfolio.
It will be aEconomic of scale and that we will realize all our four plus one or four plus two strategy also in Sweden. This is very good. As Helene has told you, the transaction meets all acquisition criteria and is a feat of Vonovia shareholders in the first year of consolidation. To remind you, we will continue to use our scale in Sweden now, and we will show that this is the same development. If you allow me to compare the transaction, it is probably for Sweden, the same type of transaction we have done in the past where we merged GAGFAH and Deutsche Annington. Keep in mind that Sweden is smaller from the size and from the importance of this. This is comparable to the Annington GAGFAH transaction, and this will give a great future for the Swedish activities.
In Austria, we will continue to run an operating scalable business. Probably also there we will see acquisitions if possible. In France, we are still continuing to work on it. In the Netherlands, we are waiting for opportunities. Again, Vonovia is developing a strategy, is trying to work it out step by step. We will deliver step by step, not only today, but also in the next years. That's it. Thank you very much.
Operator, we can then move to the Q&A, please.
Yes, ladies and gentlemen, if you have a question for our speakers, please dial zero-one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it is your turn to speak, you can dial zero-two to cancel your question. If you are using speaker equipment today, please lift the handset before making your selection. One moment, please, for the first question. The first question is from Sander Bank, Barclays. Your line is now open.
Hi, good morning. Two questions from me, please. First one is on the Group FFO accretion. Can you just give a bit more detail on how much of this accretion is derived from privatization, and how much is from the ongoing rental business? The second one is on the NAV accretion. Can you please explain how this deal is NAV accretive given that the offer price is SEK 215 and Hembla has a last reported NAV of SEK 181. Thank you.
The first I'm doing and the second is probably Helene doing. To be very clear on the first, we are not putting into account any disposal. In Sweden, the business model is relatively simple. We have the flats where you have to do modernization in a much higher scale than in Germany. With this you have a significant NAV accretion, and we are not disposing assets in Sweden. Everything is coming from this business. Of course, there is significant synergies because today we have two subcritical companies, Hembla and Victoria Park, and with this size we can now install the full platform, which you know from us in Germany. The synergies are coming from there. We will build up a custom organization. You will see a copy of Germany in Sweden now.
Cool. The NAV accretion?
Okay. The NAV accretion, as you can see, is for 2020 expected, so it's not current NAV. The reason why you see such strong NAV accretion is because ultimately these Swedish companies with the invest that is being done are hugely NAV accretive on the past and also in the future. If you actually look at the Victoria Park success story slide, which is slide four, you can see how the mechanism works. Actually that gives us a lot of confidence in why we're so excited about the deal.
I want to add one thing. We are not giving NAV guidance as you know. To be very clear, the price we are paying is more or less the expected NAV of the year-end of this company.
Okay. That's clearly no guidance. Just from my understanding, is that NAV accretion, is it then all expected to be from further assumed yield compression, or is that mainly from investments in the portfolio that are capitalized at a lower yield?
Yes. It's very easy. You know this. It's not yield compression, it's portfolios investment is a higher yield than in Germany. You put this on the balance sheet and the valuations, and it just comes. This is the model in Sweden. You can see it in Victoria Park, you can see it in Hembla. Actually it's the same model that you see in Germany except that in Sweden they are doing much more modernization relatively to their portfolio.
Okay. Excellent. Thank you very much.
The next question is from Marc Mozzi, Bank of America Merrill Lynch. Your line is now open.
Yes. Very good morning, everyone. Just one final detail on this FFO accretion. Is that for 61% of Hembla, or is it for 100% acquisition of Hembla? The accretion, please.
Okay, Rolf, I do this one. This is for 100% acquisition.
Okay. What sort of amount of modernization should we expect from Hembla, just based on what is targeted for 2019 or what has been done in 2018? How would you like to potentially increase that amount in the future?
Marc, you should count because the amount of modernization is dependent on the fluctuation on the apartments. We will continue probably more or less with the same speed like Hembla is doing. What we will do is, of course, and this what we have seen in Victoria Park, we will use a much more efficient system to do the modernization. That's why the modernization will be probably executed a little bit faster and much more efficient in terms of cost. You know, in Sweden, we don't have a system where we have a % you can put on top of the rent, but the new apartment is negotiated with the tenant association. Cost saving is really here a big advantage. Assume that the speed is continuing like it was in Hembla and in Victoria Park.
What sort of yield on cost then we should assume the same then for Victoria Park?
Yes.
Okay. Thank you very much.
Keep in mind, of course, there is two companies which are today subcritical. A big part of the synergies is coming from just operational excellence. This is like the merger you have seen in GAGFAH and Deutsche Annington. Same thing will happen there. Second is, of course, financing. We have experiences in Victoria Park for a big company like Vonovia, it's much cheaper than for a standalone company owned partly by private equity.
Maybe just a last one, just to do a proper math. Are you expecting any tax synergies from Hembla?
No, we don't have to put this into calculation.
Okay. Thank you very much.
The next question is from Christopher Fremantle, Morgan Stanley. Your line is now open.
Yeah. Good morning. I just wonder, while we're on the subject of M&A, whether you can just briefly talk about France. I know you mentioned it. How much closer are you now to an investment in France? Has that changed? Has the situation changed at all? Or are we basically in the same position as we were at the start of the year?
A very good question. France is a difficult market for us. There's always opportunities coming up. Sometimes they realize or they're close to realize, sometimes they're not. I would say we are still working in France. We have to find a way how we can do investment without the assumptions that the law is changing. Again, as I say always, France is a longer-term perspective, of course, this is the biggest market, and that's why we will continue to do in France. It's a difficult market in this legal environment at the moment.
Thank you.
You never know, huh?
The next question is from Georg Kanders, Bankhaus Lampe. Your line is now open.
Yeah. Good morning from Düsseldorf. I have just one question remains. How much of the synergies, the EUR 30 million, is already factored into this accretion for 2020?
They're all factored in because it's on a pro forma basis.
You expect more or less the EUR 30 million to be achieved already by 2020?
More or less, yes.
Okay, thanks.
At the moment, there are no further questions. As a reminder, if you would like to ask a question, please press 01 on your telephone keypad. As there are no further questions, I would like to hand back to you, Rene.
Thank you, Judith. That concludes our call today. Thank you everyone for dialing in on such short notice. As always, if you have further questions, please feel free to reach out to me or my team. That concludes the call. Have a great day, everyone.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.