Voluntary takeover bid announced

– conwert files bid: Yesterday morning, ECO’s main single shareholder conwert announced to submit a voluntary takeover bid for ECO shares at EUR 6.50. The minimum acceptance threshold amounts to 50% + 1 share of free float, which we believe is likely to be achieved.

– Rating cut to Hold: Following the bid, we increase our target price from EUR 6.2 to EUR 6.5, but reduce our rating from Buy to Hold. As the offer price is some 5% above our latest target price and also clearly above the latest closing price (+16.5%) and 6M average (+34.3%), we recommend investors to accept the bid in the initial offer period. ECO shareholders would then receive the actual cash at the beginning of August.

– Increase of bid unlikely: To achieve 50% + 1 share of free float, it ultimately means that conwert needs around 65% of ECO shares in total. Between 65% and 90% of ECO shares, there will probably be a merger between the two (at so far unspecified merger terms) following the bid. If >90% are achieved, there will very likely be a squeeze out at EUR 6.50. We believe that there is a low chance that ECO will still be separately listed in 12 months from today.

– Sale of Opernringhof: ECO announced on the evening before the conwert bid that it had sold one of its biggest properties (the Opernringhof/Vienna) at EUR 101mn - with EUR 7mn profit compared to the latest book value.

– Change in estimates: Including the above-mentioned deal, we increase our EPS estimate for 2010 from EUR 0.41 to EUR 0.58, but lower our estimates for 2011 (from EUR 0.53 to EUR 0.50) and 2012 (from EUR 0.58 to EUR 0.56).