In a major step towards consolidation of the sector, the cash-and-shares deal would include the elimination of around 9,000 jobs, the creation of a trust worth nearly a billion euros, to cover risks connected with some Dresdner assets, and leave Allianz with a share of around 30 percent in Commerzbank, statements by the two sides said.
“This transaction is a milestone for banking consolidation in Germany,” Allianz chief executive Michael Diekmann was quoted as saying. It was to take place in two stages and be completed no later than the end of 2009, pending approval by regulatory authorities.
In its statement, Commerzbank said it would eliminate 9,000 full-time jobs as part of the takeover, including 2,500 outside Germany. Chairman Martin Blessing said: “The deal will secure many attractive jobs for the long term, even though unfortunately we cannot keep all current positions.”
The bank would book around €2.0 billion in restructuring costs next year, but said it expected savings of around €5.0 billion, mainly by 2011. It forecast a total 11 million private customers and more than 100,000 corporate and institutional clients, along with 67,000 employees.
In the deal’s first stage, Commerzbank was to acquire 60.2 percent of Dresdner in exchange for its own shares, which would represent 18.4 percent of its equity, once a capital increase is carried out. Commerzbank was also to pay Allianz €2.5 billion in cash, and transfer its Cominvest fund, which is valued at 700 million euros, to the insurer.
The bank would pay up to €975 million of the cash sum into a trust to cover risky asset-backed securities currently owned by Dresdner Bank. In the second stage, Dresdner would be merged with Commerzbank, with the latter acquiring all outstanding shares in exchange for stock of its own worth about €3.2 billion.
Beginning with a total of around 1,540 branches, the bank planned to operate approximately 1,200 by 2012, it said. The combined bank would have estimated total assets of around €1.1 trillion but still trail number one Deutsche Bank, at €1.99 trillion.
The deal creates a banking heavyweight better able to compete with Deutsche Bank, but workers in Dresdner’s troubled investment banking unit would likely pay a stiff price in terms of jobs.
Commerzbank financial director Eric Strutz said: “We are looking for amicable solutions and will closely involve employee representatives in all of the necessary measures – this is part of our corporate culture.”
There would be no outright firings before the end of 2011, the bank said.
Allianz, the biggest European insurance group, paid around €24 billion for Dresdner seven years ago, gambling on making a bigger profit from combined insurance and banking activities. It would continue to sell insurance through the merged bank.
The state-owned China Development Bank was also considered a front-runner for Dresdner Bank, but may have been sidelined by political considerations, since the mood in Germany at present is one of caution regarding foreign investors.
Dresdner’s sale also allows Commerzbank to strengthen its relationships with Germany’s successful “Mittlestand” industrial companies. Allianz in turn will become “the largest shareholder by far and a strong partner of the new bank,” its statement said.
The deal marked a significant step in the unfolding consolidation of Germany’s banking sector, where numerous local public savings banks and co-operative banks continue to play a leading role. Commerzbank planned to focus now on private and corporate customers, especially Mittelstand firms, as well as central and eastern Europe, public finance and commercial real estate.