Report
Expert Corporate Governance Service (ECGS)
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LEG Immobilien - AGM 19 August 2020

General: The AGM is to be held in the form of a virtual AGM in accordance with the German Law to Mitigate the Consequences of the COVID-19 Pandemic. The physical presence of shareholders or their authorised proxies is not possible. The voting rights may therefore be exercised solely by postal vote or by granting authority to the proxies designated by the Company.

LEG Immobilien is one of Germany's leading listed real estate companies with around 136,000 rental properties and more than 365,000 residents. The Company has seven branch offices in North Rhine-Westphalia, providing personal local contact. In financial year 2019, LEG Immobilien generated rental and lease income of around EUR 809m.

Following the capital increase implemented on 24 June 2020 (see below for details), the Company has issued 71,379,836 shares that amount to a share capital of EUR 71,379,836. As of 31 December 2019, MFS held 10.5%, BlackRock Inc. held 7.5%, BNP Paribas Asset Management held 3.2% and Flossbach von Storch held 3.0% of the Company's shares.

On 22 May 2020, LEG Immobilien confirmed talks with TAG Immobilien AG about a potential combination of the companies' businesses by way of a voluntary public takeover offer through the exchange of shares of TAG Immobilien into shares of LEG Immobilien. However, on 26 May 2020, LEG Immobilien and TAG Immobilien disclosed that they had jointly terminated the talks, as no agreement could have been reached particularly with regard to a possible exchange ratio. Therefore, the potential business combination will not be pursued any further, according to the companies.

On 22 June 2020, the Company announced the acquisition of around 7,500 residential units in Brunswick, Hanover, Flensburg, Cologne, Koblenz and the Rhine-Neckar region via two transactions for a total purchase price of around EUR 767m. The first portfolio acquired from Deutsche Wohnen SE includes 6,380 residential units and 38 commercial units, while the second portfolio comprises 1,075 residential units and 7 commercial units from a private sale. Both transactions are still subject to approval by the responsible antitrust authorities. Transfer of ownership is scheduled for the end of the year.

On 24 June 2020, the Management Board with the approval of the Supervisory Board resolved to make partial use of Authorised Capital 2018 to increase the Company's share capital by EUR 2.37m through the issuance of 2.37m new shares against contributions in cash. Shareholders' preemptive rights were excluded. The issue price was EUR 115 per share, resulting in gross proceeds of around EUR 273 million. Furthermore, by making partial use of the respective authorisation by the AGM 2018, LEG Immobilien issued convertible bonds due in 2028 in the total nominal amount of EUR 550m, initially convertible into approxiamately 3.54m existing and/or new shares (from Conditional Capital 2013/2017/2018), also with shareholders' preemptive rights excluded. The net proceeds from the capital increase and the issuance of convertible bonds is inteded to finance the recent acquisition of 7,500 residential units as well as for general corporate purposes, according to the Company.

Item 8: We recommend to oppose the approval of the remuneration system for the Management Board members due to concerns over insufficient disclosure which fails to enable us to assess the remuneration structure under the new system. In addition, we have concerns over the possible granting of an extraordinary transaction bonus.

Item 12: The Management Board and the Supervisory Board propose the conversion of the Company's legal form into a European Company (Societas Europaea, SE) by way of a so-called merger by absorption. Such a proposal requires approval of the AGM. ECGS sees no disadvantages for the shareholders by introducing the legal form of an SE. We recommend support.

Underlying
LEG Immobilien AG

Leg Immobilien is a real estate company engaged in the management of its residential property portfolio as well as the acquisition of housing portfolios. As of Dec 31 2013, Co.'s portfolio comprised 94,311 residential units, 1,031 commercial units and 22,903 garages and parking spaces. These assets are distributed across around 160 locations, most of which are in North Rhine-Westphalia, Germany.

Provider
Proxinvest
Proxinvest

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