LONE Star Funds, the Dallas-based private equity firm, agreed to buy IKB Deutsche Industriebank AG after the German bank collapsed, becoming the country's first casualty of the subprime mortgage crisis.
The United States firm said it will acquire a 91-percent stake in Dusseldorf-based IKB from state-owned development bank KfW Group after beating a rival bid from RHJ International SA, Timothy Collins's investment firm. KfW declined to give the precise purchase price yesterday, saying it didn't get the 800 million euros ($1.2 billion) the government had originally sought, Bloomberg News reported.
The agreement ends an 11-month search for a buyer. The government led a 10-billion-euro bailout after part of IKB that bought subprime mortgages ran out of funding last July. KfW has since ousted Chief Executive Officer Stefan Ortseifen and three other top IKB executives after auditors blamed "flawed" risk management for the lender's collapse.
"This will finally bring clarity and calm," Green party law maker and KfW administrative board member Christine Scheel said in a telephone interview yesterday. "It was the right decision to sell the bank as quickly as possible."
IKB and its funding units have posted about $15.1 billion in writedowns, more than any other German bank, according to data compiled by Bloomberg News. In all, the world's biggest banks and brokerages have announced more than US$504 billion in markdowns.
KfW received a "low three-digit million-euro sum" for its stake, KfW Chief Executive Officer Wolfgang Kroh told reporters in Frankfurt yesterday. He described the price as "reasonable" and declined to be more specific.
IKB rose 9 percent to 2.92 euros yesterday in Frankfurt, valuing the bank at about 283 million euros.
Lone Star will inject fresh capital into IKB and split some of the bank's remaining financial risks with KfW, Kroh said. The government won't provide further funds, he added.
John Grayken, 52, started Lone Star in 1995 after prospecting for bad loans with Texas billionaire Robert Bass during the US savings and loan crisis of the early 1990s. The firm is targeting distressed financial assets around the world.
It agreed last month to buy US$30.6 billion of collateralized debt obligations from securities firm Merrill Lynch & Co for about a fifth of their face value.