Deutsche takes over Dresdner for $ 30 bn

The deal, billed by the two banks as a merger of equals, is worth between 32 billion and 35.5 billion euros based on Reuters calculations and would imply a premium of up to 20 per cent on Dresdner’s closing share price on Wednesday.

The restructuring will entail one-off costs of three billion euros, the banks said. The two vehemently denied reports that Dresdner’s Kleinwort Benson investment banking arm would be closed but said overlaps in all areas apart from asset management would be removed.

Some 16,000 jobs will be lost in the initial stage of the merger from a worldwide group total of 142,000, with around staff axed in the group’s Global Corporates and Institutions division, which comprises investment banking.

Deutsche Bank chief executive Rolf Breuer told a news conference that Kleinwort Benson was a "jewel". "It will neither be closed nor sold and the reports are pure nonsense," he said.

The banks gave no final merger terms in a statement released early on Thursday, but said Deutsche shareholders would take between 60 and 64 per cent of the merged bank, while Dresdner shareholders would get 36 to 40 per cent. Final merger terms will be determined by an independent audit. "What is being created here is a European power house with international reach," said Breuer. The bank was positioning for international expansion, he said, implying it was ready to become a predator in the fast-consolidating banking market.

In an interim step, insurer Allianz AG will take a 49 per cent stake in Deutsche’s Deutsche Bank 24 retail banking arm in a move that will boost its distribution of insurance products. Allianz’s stake will fall to about 32 per cent when Dresdner merges its retail operations with those of Deutsche. After the merger, Deutsche Bank will sell its fund management arm DWS group as well as Finanza & Futuro to Allianz.

Allianz, which owns five per cent of Deutsche and 22 per cent of Dresdner, will also take control of the insurance activities of Deutsche Bank which are combined in Deutscher Herold.

Allianz, Deutsche and Dresdner will reduce their cross-holdings to below five per cent following the merger. The banks said they would float their combined retail banking operations within three years and focus on the more profitable areas of private banking for wealthy individuals, corporate banking, investment banking and asset management.

Improved profitability and shareholder value were the main drivers behind the deal, Deutsche said in its statement. It predicted the cost savings would boost its return on equity pre-tax to 22 per cent excluding goodwill.

Deutsche said it expected to realise its full annual cost savings potential of 2.9 billion euros by 2003 and would save an additional 0.5 billion euros on top of that in the next two years by pooling investment in e-commerce.

Bernhard Walter, chief executive of Dresdner Bank, is due to run the merged bank together with Breuer. Walter, 58, said he would get a five-year contract following the merger and expected to serve the full term. Breuer, 62 and due to retire at 65, said he would leave in 2002 and be replaced by another Deutsche Bank executive, so that joint leadership of the bank will remain intact.

The banks said that after an integration period, the merged banks would have a 10-member management board, with six executives from Deutsche Bank and four from Dresdner. During an interim period, there will be 14 management board members, eight from Deutsche and six from Dresdner.

Four Dresdner management board members will leave the board,including former Bundesbank official and head of Dresdner’s investment banking unit Gerd Hauesler and Heinz-Joerg Platzek.

Commerzbank seen as next target

FRANKFURT: Confirmation of the deal coincided with speculation of yetanother bank merger as a newspaper reported the HSBC banking group planned to launch a hostile bid for Commerzbank AG, Germany’s fourth-largest bank.

HSBC and Commerzbank declined to comment on the report, published in Die Welt newspaper on Thursday. Commerzbank shares shot up more than 10 per cent on Thursday following the report and were quoted up eight percent at 45.39 euros at 0830 GMT.

It will also turn up the pressure on Commerzbank, long seen as vulnerable to takeover in a fast consolidating banking market. Commerzbank’s shares jumped 20 per cent last month on rumours that Dutch group ABN Amro was planning a bid.