|
Commerzbank shares drop 10 pct on news of Dresdner takeover
2008-09-01
FRANKFURT (AFP) - Shares in Germany's second biggest bank, Commerzbank, fell 10 percent on Monday after it announced a near 10-billion-euro takeover of number three Dresdner Bank. Investors pushed the share price down by 10.20 percent to 18.04 euros at the close on the Frankfurt stock exchange, while the DAX index of German blue chips finished 0.01 percent lower overall. Commerzbank, which has a market value of 13 billion euros (19 billion dollars), is to finance its 9.8-billion-euro purchase in cash and stock with two capital increases that must be approved by shareholders. Standard and Poor's lowered its outlook on the bank meanwhile to "negative" from "stable," citing "risks associated with the acquisition and the difficult market environment." Political figures had welcomed a domestic tie-up that reinforces Commerzbank as number two behind Deutsche Bank but analysts called the operation a better deal for Dresdner's parent group, the insurance giant Allianz. Its shares gained 0.04 percent to 114.14 euros on Monday. Finance Minister Peer Steinbrueck told the Rheinische Post newspaper "it is a very good decision ... (that) reinforces the German financial sector." Commerzbank chairman Martin Blessing told media in Frankfurt: "We are seizing a unique opportunity with the purchase of Dresdner" to make his group "more competitive on an international level." Commerzbank will take over Dresdner in two stages by the end of 2009 and eliminate 9,000 jobs, including 6,500 in Germany, with Blessing retaining the combined entity's top post. It will still trail Deutsche Bank by a wide margin in terms of total assets -- around 800 billion euros compared to nearly two trillion -- and have Allianz as a major shareholder, with a stake of around 30 percent. Sal Oppenheim analyst Carsten Werle told AFP: "We think the price is high for Dresdner Bank" but added: "I think for Allianz it was a good deal." Commerbank will pay for Dresdner with new shares and by transferring its Cominvest fund to Allianz, along with some 2.5 billion euros in cash, of which 975 million would initially be placed in a trust to offset unexpected losses. They could emerge in particular at the investment banking unit Dresdner Kleinwort. That business has weighed on Allianz's results since the insurer bought Dresdner seven years ago for 24 billion euros, and was hit especially hard by the US subprime home loan debacle and subsequent international banking crisis. Werle found it "a bit surprising that there is no major risk shelter from Allianz' side." Investment banking activities, along with back-office operations, will bear the brunt of the job cuts, but Dresdner boss Herbert Walter told a press conference there would be "no outright firings before 2011." Merck Finck analyst Konrad Becker told AFP he thought the 2,500 jobs slated to be shed abroad would probably come at Dresdner's London operations and "will be done very fast." Commerzbank expected savings of around five billion euros, mainly by 2011, from the deal, but was to book around two billion euros in restructuring costs next year. The bank planned to reduce its total number of branches from 1,540 to 1,200, while serving more than 11 million private clients and 100,000 corporate customers. It would have a combined staff of 67,000 before posts were eliminated. Analysts at brokerage Raymond James said "the transaction appears globally positive" for Allianz, which will continue to offer insurance coverage through bank branches, its reason for buying Dresdner Bank in the first place. Both Werle and Becker said the impact on the German banking sector, which is comprised of publicly-owned savings banks, cooperative banks and private banks, would be fairly limited. The position of the first two "is not challenged by this merger," Becker said. The 136-year-old Dresdner Bank, however, appeared to be nearing its end. "We want one brand," Commerzbank financial director Eric Strutz told reporters. "We have decided it will be Commerzbank."
| 
