Privatization of TLG IMMOBILIEN GmbH 2012 - 2015 Lone Star

Facts & Circumstances:

TLG IMMOBILIEN GmbH (TLG) is a German commercial real estate company which was founded in 1991 after the unification of Germany took over formerly GDR state owned real estate assets. Effective as of December 31, 2012 TLG was taken private in a tender won by Lone Star (LS) for a purchase price of EUR 1.1bln. 

German Ministry of Finance Source 

Fact Sheet TLG IMMOBILIEN as of before privatization 

 In a difficult environment LS managed to get TLG IPOed in October 2014 at a price of €10.75, all shareholding was sold off until July 2015.

Since then TLG developed quite well, did grow organically and via M&A and was control over TLG was acquired by competitor Aroundtown in late 2019. The COVID-19 restrictions are hitting commercial (break and mortar) businessses really hard, yet the recovery since the initial shock has been very step. This phenomenon can be overserved throughout the industry and is not TLG specific.

Question:

As a citizen I am always quite sceptical about the benefits of privatizations. So I wanted to find out: How much return did Lone Star make with this transaction.

Analyis:

I analysed the annual report 2013 - 2015 for transactions of/with shareholders and stock prices for share prices. All following values are in kEUR, except stated otherwise

The transaction between TLG and LS amount to the following:

The sale of share by LS in the open market I calculated as follows:

This makes a total calculated gain of EUR 1,216,072k vs. intital investment of EUR 1,100,000k, not taking into account discounting.

The return of EUR 116,072k sounds impressive at first, but if you consider it is equivalent to 10.6% based on capital invested for a holding period of 2.5 yrs and the risks involved is worse than I would have expected. I expect they have loaded up on debt to leverage but at 4.2% ROI p.a. I am not sure if they could debt finance at a much lower rate (back in 2012).

Concusion:

The € 1.1bln sales prices of the Ministry of Finance seems to have been quite a fair price at the point in time and certainly no steal/bargain for LS.

Historical Successful/Failed German IPOs last 3/5years - IPO Discount

I analysed the last 5 years of IPOs in Germany and there performance.
I screen every initial public offering in a German market since 2007.
It does not look very good for the IPO buyers, especially on the long term (3 years plus). Traditionaly people speak of an IPO discount of 15-30% given on the intrisic value to motivate investors to buy into IPOs.
However this data shows that more the opposite is true, an IPO premium of at least 15%.
Now maybe the German market is just really bad for IPO-investors. As my data shows there were only a total of 14 IPOs above a 0% performance, only 5 of them from 2008 and 2007.
In my opinon that is a pretty devastating account.

The 3 latest  years (2012-2009)
3 yr Median:                      -12,37%
3 yr Arith. Middle:            -15,60%
3 yr Variance:                     29,35%
3 yr Nr. IPOs:                     31
This is year 4 and 5, or 2008 and 2007, which shows the worst performance, probably since it includes all the IPOs from boom year 2007 where a lot of junk went public:
4 yr - 5 yr Median:           -63,64%
4 yr - 5 yr Arith. Middle: -49,51%
4 yr - 5 yr Variance:          39,97%
4 yr - 5 yr Nr. IPOs:          49
Here the total time span of 5 years:
5 yr Median:                     -52,58%
5 yr Arith. Middle:           -36,37%
5 yr Variance:                    38,58%
5 yr Nr. IPOs:                    80