Deutsche Bank AG plans to raise as much as 1.8 billion euros (US$2.2 billion) in an initial public offering (IPO) of its asset-management unit, a key pillar of the German lender’s turnaround strategy.
Deutsche Bank is to offer 40 million shares of DWS at 30 euros to 36 euros apiece, with the potential sale of a further 10 million shares in an overallotment and upsize option, the bank said in a statement late on Sunday.
Nippon Life Insurance Co agreed to acquire a 5 percent stake in DWS in the IPO at the issue price. The offering values the asset manager at 6 billion euros to 7.2 billion euros, with the first day of trading expected on March 23.
A successful offering of DWS after a surge in market volatility would mark an important achievement for Deutsche Bank CEO John Cryan, who proposed the sale a year ago to help bolster the lender’s capital. The unit — headed by Nicolas Moreau — will also gain more independence and flexibility for acquisitions at a time when companies are under pressure to expand in the asset-management business.
“Key attractions” of DWS are its diversified portfolio across many asset classes and global scale, Barclays PLC analyst Daniel Garrod wrote in a client note late last month.
A return to net money outflows and failure to cut costs are major risks to the business, he said.
The unit has also had a mixed performance across regions. While assets under management in Germany have been increasing, with a particularly strong jump in the second quarter of last year, its US funds have yet to recover from the massive outflows in 2016.
Deutsche Bank did not give more details on its plans with Nippon Life, beyond saying it was a “cornerstone investor,” and that the “strategic alliance is consistent with and will help accelerate our focus on growing in the Asia region.”
DWS has about 700 billion euros under management and was expected to be worth between 6 billion euros and 8 billion euros once it trades, people familiar with the matter had said before the announcement.
That is in line with Amundi SA, which has twice the amount of assets and a market value of 13.7 billion euros. Companies typically sell shares at a discount to their target valuation to lure buyers.
Shares of Deutsche Bank fell 0.5 percent to 13.04 euros in Frankfurt on Friday. The stock is the second-worst performer this year among the 42 companies in the Bloomberg Europe 500 Banks and Financial Services Index, with a decline of about 18 percent.
DWS has a 30 percent stake in a Chinese joint venture, Harvest Fund Management Co (嘉實基金), but cannot consolidate the company’s more than US$100 billion in assets under management because it only has a minority stake.
Deutsche Bank tried to sell much of the asset management unit in 2012, but stopped when it could not get enough money.
The business is targeting net inflows of 3 to 5 percent of assets a year, a number that might be difficult to reach after several key funds saw recent outflows, according to Autonomous Research.
Global IPOs are up about 25 percent this year compared with the same period last year.
Companies sold US$27.9 billion of stocks this year through March 4, compared with US$22.2 billion a year ago at this time, according to data compiled by Bloomberg League Tables. The number of deals rose 2.5 percent.
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