Commerzbank, Allianz Supervisory Boards Meet for Dresdner Sale

By Aaron Kirchfeld and Jann Bettinga

Aug. 31 (Bloomberg) -- Commerzbank AG, Germany's second- biggest bank, and Allianz SE are holding supervisory board meetings today to decide on the sale of Dresdner Bank.

Commerzbank may acquire Dresdner for about 9 billion euros ($13.3 billion), according to two people with knowledge of the matter, helping the Frankfurt-based bank leapfrog Deutsche Bank AG as Germany's largest lender by customers and branches. Commerzbank and Allianz, Europe's biggest insurer, agreed in principle on a deal earlier this week, the people said Aug. 29.

A deal would double Commerzbank's retail clients to 12 million and branches to 1,900 in Germany, and save costs by shedding jobs and closing locations. For Munich-based Allianz, Europe's largest insurer, the sale would unwind the 23.5 billion-euro acquisition of Dresdner, which has dragged on its profit and stock since 2001.

``A combined Commerzbank and Dresdner could significantly boost efficiency,'' said Konrad Becker, a Munich-based analyst at Merck Finck & Co. The banks could save as much as 800 million euros in personnel costs by slashing about 8,500 jobs in areas such as administration and information technology, he said.

Munich-based Allianz on Aug. 29 confirmed that it's in ``advanced talks'' about its Dresdner Bank unit that ``may or may not lead to a deal.'' The sale still could unravel over unresolved questions such as how much of any future losses at Dresdner's securities unit Allianz is willing to shoulder, said the two people, who declined to be identified because they weren't permitted to comment on negotiations.

Allianz's Decline

Spokespeople at Allianz and Commerzbank, who confirmed that members of the supervisory boards were meeting today, declined to comment further on a possible agreement. A spokesman at Dresdner Bank also declined to comment.

Commerzbank fell 37 cents, or 1.8 percent, to 20.09 euros in Frankfurt trading on Friday, valuing the bank at 13.3 billion euros. Allianz gained 60 cents, or 0.5 percent, to 114.10 euros, giving the insurer a market value of 51.6 billion euros.

The German insurer has fallen about 61 percent since the Dresdner acquisition was announced April 1, 2001, more than the 49 percent drop in the Bloomberg Europe 500 Insurance Index.

Commerzbank plans initially to buy 51 percent of Dresdner and acquire the remainder next year, according to two people close to the matter. The bank might also swap its Cominvest asset management unit as partial payment for Dresdner and Allianz may keep a stake of less than 30 percent in the combined bank, one of the people said.

Blessing, Diekmann

Commerzbank Chief Executive Officer Martin Blessing, 45, took over in May from Klaus-Peter Mueller, who revived Commerzbank's profit by scaling back investment banking, cutting jobs and focusing on lending to mid-sized German companies and retail banking.

Allianz CEO Michael Diekmann, 53, put Frankfurt-based Dresdner up for sale this year after subprime-related losses at the Dresdner Kleinwort securities unit eroded profit. Allianz has also been in discussions with state-owned China Development Bank, which finances the nation's public works projects.

A hurdle to any agreement will be the investment bank, which amassed more than 3 billion euros in writedowns tied to the global credit crisis through the second quarter. Dresdner posted its fourth straight quarterly loss on Aug. 7, following writedowns at the investment bank. The so-called risk shield offered by Allianz may be about 1 billion euros, two people close to the matter said.

K2 Risks

Allianz and Commerzbank are also in discussions over risks from K2 Corp., the 8.8 billion-euro structured investment vehicle bailed out by Dresdner. Possible writedowns related to Commerzbank's 83 billion-euro commercial real-estate book may also prove a sticking point, one person said.

The combined group would have worldwide more than 72,000 employees, compared with 80,000 at Deutsche Bank. Commerzbank may shed about 9,000 jobs mainly by offering early retirement and through natural personnel fluctuations, one person said.

The acquisition would be the largest among financial- services companies in Europe this year and the third banking takeover in Germany in the last two months as rivals vie for a larger slice of the nation's consumer market, which remains dominated by state-owned lenders.

Citigroup Inc. announced on July 11 the sale of its German consumer unit to France's Credit Mutuel Group for 4.9 billion euros in cash. Lone Star Funds, the Dallas-based private equity firm, agreed to buy IKB Deutsche Industriebank AG, the first German subprime casualty, on Aug. 21.

Market Shakeup

Takeovers will shake up financial services in a market still dominated by public lenders and where ``tooth-and-claw'' competition has sapped profitability, Citigroup analysts said in a February report. Deutsche Bank, Commerzbank, Dresdner, HVB Group and Deutsche Postbank AG control about 11 percent of savings deposits, compared with 51 percent at the savings banks and 30 percent at cooperative lenders, according to the German association of private banks.

Commerzbank and Dresdner together have about 1.1 trillion euros in assets, compared with Deutsche Bank's 2 trillion euros. Deutsche Bank CEO Josef Ackermann has said he would consider acquisitions to boost consumer banking. The company was outbid for New York-based Citigroup's German unit.

Deutsche Post AG, Europe's biggest postal service, reiterated on Aug. 19 that it's still holding talks with ``various potential partners'' about a possible sale of Postbank, which has 14.5 million customers and 850 branches.

To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net; Jann Bettinga in Frankfurt at jbettinga@bloomberg.net