Hypo's nationalization

The government's Financial Market Stabilization Fund, SoFFin, now holds a 47.31 percent share of Munich-based HRE, after the government's bid to buy up shareholders' stock.

The government's offer, worth 290 million euros ($386 million), expired at midnight Monday. Each share had a cash offer of 1.39 euros.

In Berlin, Finance Minister Peer Steinbrueck said he was pleased with the results of the share buy offer.

"This now means the government can continue with the planned takeover of HRE shares, according to stock corporation law," he said.

"Only with the complete government takeover can HRE's survival be ensured and the taxpayers' interests protected," Steinbrueck added.

Despite the fact that Berlin failed to come up with 50 percent of shares, Steinbrueck said that SoFFin could complete a takeover of the firm through means made available by German shareholder law.

Hannes Rehm, chairman of the SoFFin Management Committee, is optimistic that will happen: "We will consistently pursue our efforts to stabilize HRE," he said.

"The bank is of systemic relevance and must be rescued in order to ensure stability of the financial markets and the German economy. I expect the envisaged capital increase to be approved by the extraordinary general meeting," he added.

A capital increase is a type of equity issuance in which new stocks are offered for sale.

HRE shareholders have been invited to the extraordinary general meeting on June 2.

At the meeting, SoFFin will subscribe all of the new shares, excluding subscription rights of the shareholders. This will give it a majority of 90 percent, as well as voting rights.

That will pave the way for a takeover of the shares held by the remaining minority shareholders - through a so-called "squeeze-out" procedure. SoFFin does not expect the price to exceed the original offer price of 1.39 euros per share.

US private equity firm JC Flowers & Co, which rejects the government's plans, still owns about 14 percent of HRE.