Deutsche Annington is expected to win a spot on the DAX index of leading German shares next month, representing the real estate sector for the first time after acquisitions helped it to expand rapidly. Deutsche Annington is poised to replace Lanxess, the world's largest synthetic rubber maker, in the first shake-up of the country's top share index in three years. "This change is as good as decided," said one market watcher, who declined to be named.
Dropping out of the DAX will put more pressure on shares of Lanxess as index-linked funds remove it from their portfolios and replace it with Deutsche Annington stock. The market value of Deutsche Annington, which is changing its name to Vonovia, has more than tripled to around 13 billion euros ($14.9 billion) from about 4 billion when it was first listed on the stock exchange in 2013.
Also at risk of demotion is Lufthansa, one of the DAX's original members, which has lost 20 percent of its value this year as it battles to cut costs enough to keep up with airline rivals. The 30 names making up the DAX are reviewed annually but have remained unchanged since September 2012. In contrast, the UK FTSE 100 is reviewed every quarter, usually leading to some changes.
Membership of the DAX is dependent on two criteria - trading volumes and the value of the shares in free float. Lanxess has lost about 30 percent of its value since it joined the DAX in the last reshuffle three years ago, making it the smallest company on the index with a market capitalisation of 4.2 billion euros.
The second-smallest is Lufthansa. The possible exit of the German airline would pave the way for the entry of media group ProSiebenSat.1, which has been leapfrogged in the queue after Deutsche Annington increased its capital to fund acquisitions. "Until then, the media group was the undisputed favourite for the DAX," LBBW analyst Uwe Streich said.
The DAX changes will be announced by stock exchange operator Deutsche Boerse on September 3 and take effect on September 21. Analysts see Hella, a manufacturer of auto headlights and electronics, recently floated lender Deutsche Pfandbriefbank and real estate group Alstria Office as possible candidates for the mid-cap MDAX index in the reshuffle.