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Über-Bank late for Merger Mania

by DoDo Mon Sep 1st, 2008 at 05:56:57 AM EST

Germany's second biggest bank by balance sheet total, Commerzbank, recently announced the purchase of Germany's third biggest bank, Dresdner Bank (Magnifico reported).

Trade unions are concerned, because of the planned loss of 9,000 jobs out of the 63,000 employees total, but you do expect that. What about the markets?

Börsenreaktion: Commerzbank-Aktien brechen nach Dresdner-Kauf ein - Wirtschaft - SPIEGEL ONLINE - Nachrichten Reaction of the stock market: Commerzbank shares dive after the Dresdner purchase - Economy - SPIEGEL ONLINE - News
Die Börse straft die Commerzbank ab. Ihre Aktien haben nach Bekanntgabe der Dresdner-Bank-Übernahme mehr als sechs Prozent an Wert eingebüßt.The stock market punishes Commerzbank. The value of its shares dropped more than six percent since the announcement of the takeover of the Dresdner Bank.

Amazingly, the reason seems to be: brokers apparently looked at the dirty laundry of the companies involved, rather than the size of the new financial goliath.

As SPIEGEL too points out, the value of the deal is an indication: €9.8 billion is a lot, but the present seller, insurance and financial services giant Allianz purchased Dresdner Bank in 2001 for €24 billion.

The bank's main problem: investment bank daughter Dresdner Kleinwort, which entered the toxic derivates market in the last minute before the crash, resulting in writedowns of €3 billion for Dresdner Bank. According to speculations, Dresdner Kleinwort is to be sold soon.

Interesting sidestory: Commerzbank had a rival in the acquisition of Dresdner Bank: the China Development Bank.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Mon Sep 1st, 2008 at 05:58:48 AM EST
Details on the acquisition can be found here from Bloomberg.

Commerz says the 9000 job losses will be voluntary, with no firings until 2011.  The 134 year old Dresdner brand will dissappear.

What blows me away?  7 different investment houses advised the two parties on the deal, with undoubtedly huge consulting fees and/or commissions.  Plus two fairness vettors.

Commerz will swallow the first 275M € in toxic losses, Allianz aill swallow the next 975M €.

Who's the big winner here?  Me.  Dresdner is my bank, and i got a vastly increased credit line last week.  Amazing under those conditions, that with the merger pending, i passed vetting. Bet it wouldn't happen this week.  (That's why i increased the line, before the sale.)

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Mon Sep 1st, 2008 at 06:47:27 AM EST
If Dresdner and Allianz can't even merge their own banks withour outside intervention, why should anyone trust them with understanding banking at all?

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Sep 1st, 2008 at 06:57:51 PM EST
[ Parent ]
Commerz says the 9000 job losses will be voluntary, with no firings until 2011.

Still, it was reported that union reps on Allianz's board steadfastly voted against the merger.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Tue Sep 2nd, 2008 at 01:47:57 PM EST
[ Parent ]

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