Deutsche-Dresdner merger collapses on DKB sale

SvenButtler at SvenButtler at
Wed Apr 5 08:15:56 PDT 2000

Deutsche-Dresdner merger collapses on DKB sale By David Ibison and Andrea Felsted - 5 Apr 2000 15:00GMT

The proposed $20bn merger between Dresdner Bank and Deutsche Bank has collapsed after the two sides failed to agree on the sale of Dresdner's investment banking unit, Kleinwort Benson. Dresdner pulled out of the deal - which would have created the largest bank in the world - after Deutsche insisted either all or part of Kleinwort Benson was sold, contrary to Dresdner's wishes.

Dresdner said in a statement: "It [Deutsche Bank] refused a balanced integration of Dresdner Kleinwort Benson in the spirit and wording of the original agreement." "Through its actions Deutsche Bank has lost our trust. A tie up to the disadvantage of Dresdner Bank cannot be in the interest of the shareholders, clients and employees."

Dresdner wanted to integrate the investment bank into the merged entity, and was under the impression that Deutsche shared that view.

At the time of the deal, both indicated the investment bank would be rolled into the merged bank, but in subsequent days Deutsche openly indicated a partial or total sale was on the cards.

The deal had been hailed as a bell weather for the German financial industry and would have created one of the world's most powerful financial institutions with around $750bn in assets.

The collapse opens the way for rival financial institutions to bid for either German bank, although an offer for Dresdner is more likely.

Rival banks ABN-Amro and ING Barings are understood to have expressed interest in Dresdner before the Deutsche tie was announced and could revive their initial interest.

Citigroup, the world's largest financial services organisation, is also understood to have expressed interest but distanced itself from takeover speculation after the collapse of the deal was announced.

The shares of both banks were suspended in Frankfurt alongside those of Allianz, the insurance company, which has significant stakes in both banks.

Allianz said it could not yet comment on the failure of the deal. The German insurer was seen as the main winner from the merger of Deutsche and Dresdner.

It had agreed to take control of DWS, Deutsche's mutual fund arm, and was also set to acquire a controlling stake in Deutsche and Dresdner's combined retail banking arm, providing the insurer with a powerful distribution network and a platform for the growth of electronic commerce.

Shares in Dresdner and Deutsche Bank responded positively to news the merger had collapsed in pre-market trading ahead of the resumption of full trading.

Dresdner, which had weakened 3 per cent ahad of the suspension, recovered 2.2 per cent to E48, while Deutsche, which had dropped 4.3 per cent, was up 2.9 per cent at E79.

Allianz headed sharply south, with prior declines of 9 per cent widening to 13 per cent at E384.

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