Posted: 01 September 2008 0224 hrs
FRANKFURT: German insurance giant Allianz said on Sunday it would sell the nation's third largest private bank, Dresdner Bank, to number two Commerzbank for 9.8 billion euros (14.4 billion dollars) in a major step towards consolidation of the sector.
The cash and share deal included the creation of a trust worth nearly one billion euros to cover risks from risky Dresdner assets, and would leave Allianz with a share of around 30 percent in Commerzbank, a statement said.
It is to take place in two stages and be completed "no later than the end of 2009," pending approval by regulatory authorities, it added.
In the first stage, Commerzbank is to get 60.2 percent of Dresdner in exchange for its own shares which would represent 18.4 percent of its equity, once a capital increase is carried out.
Commerzbank is also to pay Allianz 2.5 billion euros in cash, and transfer its Cominvest fund, which is valued at 700 million euros, to Allianz.
Dresdner would be merged with Commerzbank in the second stage, with the latter acquiring all outstanding shares in exchange for its own stock worth about 3.2 billion euros.
The new German bank would have total assets of around 1.1 trillion euros but still trail far behind number one Deutsche Bank, with 1.99 trillion euros.
Savings of up to five billion euros were expected as a result of the tie-up, which reports have said could see the elimination of some 9,000 jobs.
The deal creates a banking heavyweight better able to compete with Deutsche Bank, but threatens workers especially in Dresdner's troubled investment banking unit.
Allianz, the biggest European insurance group, paid around 24 billion euros for Dresdner seven years ago in a gamble it could make a bigger profit from combined insurance and banking activities.
The state-owned China Development Bank (CDB) had also been considered a front runner, and is said to have offered more money for Dresdner, along with the prospect of fewer job losses.
Political considerations may have scuttled CDB's chances however, since the mood in Germany at present is one of wariness regarding foreign investors, especially when it comes to what are considered strategic interests.
Dresdner's sale to Commerzbank, meanwhile, allows the latter to strengthen its relationships with Germany's successful "Mittlestand" industrial companies.
Allianz will in turn become "the largest shareholder by far and a strong partner of the new bank," the statement said.
Observers said Dresdner's investment banking division, which has suffered successive quarterly losses following the meltdown of the US market for high-risk, or sub-prime, mortgages a year ago, could see heavy job cuts in London and Frankfurt.
The Sunday Times newspaper said more than 1,000 jobs could be cut in the British capital.
Union sources claimed a Commerzbank-Dresdner Bank combination would lead to the loss of up to 9,000 posts.
But the head of Dresdner's works committee, Hans-Georg Binder, told the mass market Bild am Sonntag newspaper that he estimated 4,000 jobs would go, and that some would be at Commerzbank.
The new bank would have 1,200 branches in Germany, 11 million private customers and more than 100,000 corporate and institutional clients, Allianz said.
It was estimated to have staff of around 67,000.
The deal marks a significant step in the unfolding consolidation of Germany's banking sector, although numerous local public savings banks and co-operative banks will still play a leading role. - AFP/de
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