Insurer Allianz SE agreed on Sunday to sell Dresdner Bank AG to Commerzbank AG in a 9.8 billion euro (US$14.4 billion) deal, a sale that may well herald a wave of German bank consolidation and keep foreign rivals from laying claim to a lucrative market.
The deal came after weeks of market speculation and will create Germany’s biggest bank in terms of customers, propelling it ahead of Deutsche Bank. However, the combined banks’ assets will still fall shy of Frankfurt-based Deutsche Bank’s approximately 2 trillion euros in assets.
But the decision comes with a heavy toll in terms of job cuts: 9,000 workers out of the combined banks’ ranks of 67,000 workers will be eliminated, including back office, production and investment bankers. Of those cuts, 6,500 will take place in Germany with the other 2,500 abroad.
Separately, Commerzbank employs more than 41,600 workers, while Dresdner employs more than 25,000 workers.
But executives at Allianz and Commerzbank said the deal made sense financially and in terms of expanding market share in Germany and abroad.
“We are taking advantage of a unique opportunity to make Commerzbank the leading bank for private and corporate customers in Germany,” Commerzbank chief executive Martin Blessing said.
“We are building a market leader with European significance, and are creating added value for our shareholders. At the same time, the deal will secure many attractive jobs for the long term, even though unfortunately we cannot keep all current positions,” Blessing said.
The new bank will have 11 million private customers in Germany and a thick network of 1,200 branches peppered across Europe’s biggest economy.
“We will be even more easily accessible, we will offer an even more attractive range of products, and we want to continue to enhance our joint market share,” Blessing said.
It will also have more than 100,000 corporate and institutional clients and expand its wealth-management operations for well-heeled private clients, too.
By selling to Commerzbank, Allianz will also get a new avenue for selling its insurance products through the newly combined bank’s branches, much like it has done through its Dresdner Bank branches.
It will also get Cominvest, which is worth 700 million euros.
“This transaction is a milestone for banking consolidation in Germany and strengthens the German economy,” Allianz CEO Michael Diekmann said. “With an approximate stake of up to 30 percent, Allianz will be Commerzbank’s largest shareholder and will gain access to its powerful distribution network.”
The sale was no surprise given that earlier this year Diekmann said that Dresdner’s write-downs at its investment back had eroded profit there four quarters in a row.
Under the terms of the deal, Commerzbank agreed to cover the first 275 million euro in potential losses on some asset-backed securities, while Allianz said it would cover the next 975 million euros in losses related to Dresdner assets.
The deal to sell Dresdner Bank is a two-step process, Allianz said.
First, Frankfurt-based Commerzbank will acquire 60.2 percent of its shares from Allianz and, in exchange Allianz will receive 163.5 million shares, or about 18.4 percent of Commerzbank, worth some 3.4 billion euros.
Commerzbank will also pay Allianz another 2.5 billion euros in cash.
In the second step, Dresdner Bank will merge with Commerzbank, which will acquire is remaining 39.8 percent shares “again, against a contribution in kind.” Allianz will receive 3.2 billion euro in shares from Commerzbank, giving it nearly 30 percent of Commerzbank’s shares.
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