Flowers Heads for Clash with German Gov’t Over Hypo Real Estate

FRANKFURT (Reuters) – U.S. investor J.C. Flowers is heading for a showdown with the German government by refusing to accept its tender offer for stricken Hypo Real Estate (HRXG.DE).

The private equity investor is resisting attempts by the German government to nationalise the Munich-based bank by declining to participate in a 1.39 euros a share takeover offer, which is set to expire early next week.

In a statement, Flowers said he still thought the shares were worth more than 1.39 euros — where the share is currently trading — and said investors controlling a 14 percent stake in HRE were determined to hold on to their shares.

In Berlin, the Finance Ministry said Flowers’ move would have no impact on its plans to fully take over the lender.

Flowers took a stake in the commercial real estate financing company back in May 2008, but saw the value of his investment collapse as HRE ran into trouble.

The German government has since been forced to bail out the lender with more than 100 billion euros ($132.5 billion) in loans and guarantees in an attempt to prevent a systemically relevant bank from going under.

Flowers said he had presented the German government with an alternative solution “without the need for complete nationalisation of the bank”, but did not elaborate further.

The possibility of legal action against the government drew closer as Flowers signaled he was exploring ways to “ensure that the shareholders of HRE are not treated less favourably.”

Flowers said some investors in the consortium he advises — representing less than one percent of HRE shareholders — had opted to tender their shares anyway.

(Reporting by Edward Taylor and Madeline Chambers, editing by Knut Engelmann)