COMMERZBANK AG yesterday agreed to buy Allianz SE's Dresdner Bank for 9.8 billion euros (US$14.3 billion) in the biggest financial-services takeover in Europe this year, leapfrogging Deutsche Bank AG by customers and branches.
Commerzbank fell as much as 9.7 percent in Frankfurt trading, the most since January, after analysts said the offer price exceeded investors' estimates, Bloomberg News reported.
Dresdner would be acquired in two steps, with Commerzbank purchasing 60.2 percent with cash and stock and then buying the remainder by the end of 2009, the companies said.
The acquisition doubles Commerzbank's German retail clients to about 11 million, surpassing Deutsche Bank with 9.7 million.
For Munich-based Allianz, Europe's largest insurer, the sale unwinds the 23.5-billion-euro purchase of Dresdner, which has dragged on the company's profit and stock. The insurer agreed to cover as much as 975 million euros of potential losses from assets held by Dresdner's securities unit.
For Allianz, "the Dresdner problem is finally nearing a solution," said Ernst Konrad, head of equities at BayernInvest in Munich. "With this acquisition, Commerzbank creates the clear number two in the German banking landscape."
Commerzbank fell 1.86 euros, or 9.2 percent, to 18.24 euros yesterday, bringing the decline this year to 30 percent and valuing the company at 12.1 billion euros. Allianz fell 29 cents to 113.90 euros.
Top price
The 9.8-billion-euro purchase price amounts to 1.1 times Dresdner's book value, more than "investors had been hoping for," said Citigroup Inc analysts led by Jeremy Sigee.
"Nevertheless, the terms should still be financially attractive for Commerzbank," the analysts said.
Commerzbank Chief Executive Officer Martin Blessing took over in May from Klaus-Peter Mueller, who revived profit by scaling back investment banking, cutting jobs and focusing on consumer banking and lending to mid-sized German companies. The bank has reported four straight years of profit growth.
Commerzbank said it planned to eliminate about 9,000 jobs from the combined workforce of 67,000, mostly through voluntary measures. Positions would be shed in areas including investment banking, back office and control. There would be no firings before the end of 2011, the company said.
Commerzbank would eventually drop the 136-year-old Dresdner brand, Blessing said yesterday.
Commerzbank would help pay for Dresdner by transferring its Cominvest asset management unit, valued at about 700 million euros, to Allianz.
The purchase price was "relatively high, in particular if taking into account the sale of Cominvest for a relatively modest price," said Andreas Weese, a Munich-based analyst at UniCredit SpA.
The bank expects reorganization costs of 2 billion euros and cost savings of about 5 billion euros, as it reduces the number of branches at the combined company by 22 percent to 1,200.
The takeover should boost earnings a share starting in 2011, Commerzbank said.