September 21, 2015 / 9:40 AM / 3 years ago

Deutsche Wohnen, LEG to nip at Vonovia's heels after merger

The headquarters of Austrian properties group (Immobilien Gruppe) Conwert is pictured in Vienna February 16, 2015. REUTERS/Heinz-Peter Bader

FRANKFURT (Reuters) - German real estate groups Deutsche Wohnen and LEG Immobilien aim to keep growing via acquisitions following their planned merger, racing to catch up with larger peer Vonovia.

Germany’s residential real estate sector has been marked by rapid consolidation in recent years as firms fight for a slice of a huge market for rental housing in which scale can help boost profitability.

Deutsche Wohnen on Sunday unveiled plans to merge with LEG in an all-shares deal that is worth around 8 billion euros ($9.03 billion) including debt.

The transaction will catapult the combined group to the Number three spot in Europe, behind Unibail Rodamco and Vonovia, the German group recently renamed from Deutsche Annington, in terms of portfolio value.

Deutsche Wohnen Chief Executive Michael Zahn said in a conference call on Monday that future purchases by the combined Deutsche Wohnen-LEG would focus on LEG’s core region, Germany’s most populous state North Rhine-Westphalia.

Post-merger the group will have 250,000 residential apartments in Germany, narrowing the gap with Vonovia, which has grown its portfolio to 350,000 apartments through a series of purchases and on Monday became the first real estate group ever to be represented in Germany’s blue-chip DAX index.

With a combined market value of more than 13 billion euros, Deutsche Wohnen-LEG could have a chance to become the second property firm on the DAX.

Shares in LEG Immobilien rose 5.6 percent to 74.34 euros, a four-month high, by 1148 GMT. Deutsche Wohnen’s stock slumped 6.5 percent on the prospects of a capital increase to finance the merger.

Reporting by Kathrin Jones; Writing by Maria Sheahan; Editing by David Holmes and Louise Heavens

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