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FINANCIALS: Aareal Divestment: Spread Positive, Could See Gain Flow To Equity

FINANCIALS

Aareal Bank (AARB: Baa1 neg/BBB+) confirming the sale of Aareon, its property management technology business, to TPG and CDPQ for EUR3.9bn (EV basis). This is, on the face, a very spread positive result (nearly doubling CET1) but this wasn’t an unexpected deal, and we’d expect the issuer’s PE-owners to look to take at least some of this gain out of the business. Either way, this is still good news.

  • AARB is selling this business to TPG and CDPQ for an enterprise value of EUR3.9bn, EUR2.1bn for Aareal’s equity in the unit. There looks to be an EUR2bn gain-on-sale coming in 2H24, which is around the current entire market cap of Aareal Bank. News of the sale was first reported earlier this month, so this isn’t a total surprise.
  • The CET1 of the bank was last reported at EUR2.7bn (at Dec-23), giving a 19.4% CET1 ratio. The uplift from the gain on sale is, therefore, very significant but we would be unsurprised to see this gain upstreamed to the equity owners (89% private equity-owned) at some stage.
  • Either way, this is a spread positive but not unexpected and may even push Moody’s to remove the negative outlook it put in place in Mar-24, we feel.
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