Deutsche Bank's Sal. Oppenheim Deal Seen €1.3bn
Germany's Deutsche Bank AG (DB) Wednesday said it would acquire Sal. Oppenheim Group and various subsidiaries of the Luxembourg-based private bank for around EUR1.3 billion in a deal aimed at strengthening its underperforming wealth management business.
The acquisition will make Deutsche Bank Germany's market-leading wealth manager, with more than EUR300 billion in combined assets under management.
Deutsche Bank's own wealth-management segment has suffered a steep drop in recent quarters, reporting a 36% decline in second-quarter net revenue as activity waned and impairments and market downgrades cut into returns. The unit reported a 25% decline in net revenue for full-year 2008.
"Through the acquisition of this respected private banking house, we will strengthen our asset and wealth management in Europe and especially in Germany," Deutsche Bank Chief Executive Josef Ackermann said.
Under the terms of the deal, Deutsche Bank will pay EUR1 billion for Sal. Oppenheim's Luxembourg-based holding company. Another EUR300 million will be paid by Deutsche Bank for various subsidiaries of Sal. Oppenheim, including its Germany-based business, private equity operations and BHF Bank subsidiary.
Additionally, Sal. Oppenheim's current owners have the option of maintaining up to 20% of the bank's Cologne-based German operations.
Deutsche Bank said its Tier 1 ratio would be around 11% following the acquisition - a level analysts consider reasonably comfortable. The resulting capital position is noticeably lower than Deutsche Bank's expected Tier 1 ratio of 11.7% for the third quarter, which it reported last week.
Further details on Deutsche Bank's third-quarter performance are scheduled to be reported at 0600 GMT Thursday.
Analysts have in recent weeks questioned Deutsche Bank's ability to make multiple acquisitions without raising capital, particularly in light of expected regulation that will require banks to hold more capital.
Deutsche Bank said the final purchase price could increase depending on some risk positions in Sal. Oppenheim's books. Deutsche Bank may be able to pay for the acquisition using its own shares, it said. The deal is expected to close in the first quarter of 2010.
Deutsche Bank said it planned to participate in ongoing talks on the sale of Sal. Oppenheim's investment banking operations. Australia's Macquarie Group Ltd. (MQG.AU) is widely expected to acquire the troubled investment banking business, including its derivatives trading operations.
Deutsche Bank, which has survived the financial crisis relatively unscathed and without government support, is in the midst of making several acquisitions to strengthen its domestic and international business. Last week, it said it would acquire the commercial banking assets of ABN Amro in the Netherlands from the Dutch government. It also has an agreement to buy up to a majority stake in Deutsche Postbank AG (DPB.XE), in which it currently owns around 25%.
Deutsche Bank shares closed down EUR1.56, or 3.09%, Wednesday at EUR48.90, in line with a broader German market slump. The German DAX closed 2.46% lower.
The Sal. Oppenheim deal further marks the end of the independence of one of Germany's oldest private banks and underlines a broader consolidation of asset managers, who are competing aggressively on fees as some investors pull their money out in the wake of the financial crisis. The 220-year-old bank has around EUR135 billion in assets under management, including its BHF Bank subsidiary and investment bank.
Sal. Oppenheim has struggled to keep its footing during the financial crisis and reported a EUR117 million loss for 2008. It took EUR200 million in capital from its owners last year to shore up its financing, and another EUR300 million from Deutsche Bank in August. Deutsche Bank is also said to have financed a EUR350 million loan to Sal. Oppenheim's owners last month.
-By William Launder; Dow Jones Newswires; +49 69 29 725 515; william.launder@dowjones.com
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