FRANKFURT—Two of Germany's largest apartment owners, Deutsche Wohnen AG and LEG Immbolien AG, have agreed to a business combination that would create a portfolio of 250,000 units valued at about €17 billion, or approximately US$19.2 billion. Deutsche Wohnen's stock-for-stock deal, which LEG's board has voted to accept, values LEG at just over €4.6 billion, or US$5.2 billion.

Bloomberg Business reported that the deal, which comes after an acquisition spree by market leader Vonovia SE, represents a 13% premium on the closing price of LEG stock prior to Sunday's announcement. “It looks to me like a defensive move against potentially being taken out by Vonovia, rather than a move that makes a lot of financial sense in its own right,” Peter Papadakos, a London-based analyst at Green Street Advisors, told Bloomberg on Sunday. “The 13% premium strikes me as a rather full price.”

Known as Deutsche Annington until earlier this month, Bochum, Germany-based Vonovia is Europe's second-largest publicly traded real estate company. It controls a portfolio of 370,000 apartments across Germany, valued at €21 billion (US$23.7 billion). Much of that scale has come about in the past six months, through its acquisitions of rivals Gagfah Immobilien and Suedewo Group for a combined US$7 billion.

The Deutsche Wohnen/LEG combination occurs as consolidation within Germany's commercial property market intensifies, Reuters reported on Sunday. “Record low interest rates and the search by investors for higher yields have heated up Germany's real estate market in 2015 after more than 50 billion euros' worth of property changed hands last year,” according to Reuters.

Headquartered in Dusseldorf, LEG owns about 110,000 apartment units to Deutsche Wohen's 141,900. “This is an excellent foundation to grow further together and expand our strong position in the European market,” says Michael Zahn, CEO of Deutsche Wohnen, who will run the combined company from headquarters in Berlin.