Allianz set to wrap up Dresdner sale within days

By John O'Donnell

FRANKFURT (Reuters) - Allianz (ALVG.DE) is set to chose a buyer for Dresdner this weekend as Commerzbank (CBKG.DE) and China Development Bank jockey for position in the race to win Germany's third-largest lender.

A German deal would fuse the country's second- and third-biggest banks, creating a group to rival flagship lender Deutsche Bank (DBKGn.DE).

Taking over Dresdner, which could come with a price tag of about 9 billion euros ($13 billion), would give Commerzbank (CBKG.DE) a badly needed leg up in its home market where state-owned not-for-profit rivals dominate.

Despite being one of the country's biggest lenders, Commerzbank is still a lightweight by European standards, with a market value of about 13 billion euros -- less than half that of Frankfurt neighbor Deutsche Bank.

But in recent days, China Development Bank CHDB.UL has emerged as a would-be buyer.

It was unclear, however, whether the government-owned lender would get state blessing for a bid.

One source told Reuters on Thursday that frosty relations between Berlin and Beijing after German Chancellor Angela Merkel met exiled Tibetan spiritual leader, the Dalai Lama, made a deal unlikely.

The advent of a major Chinese player could also raise political hackles in Berlin.

Were China -- which has lost money investing in Barclays (BARC.L), Morgan Stanley (MS.N) and Blackstone (BX.N) -- to drop out, Dresdner would likely be paired off with Commerzbank.

HIGH NOON

Allianz's supervisory board will meet on Sunday afternoon and most observers expect it to rubber stamp a disposal of a bank bought amid fanfare seven years ago but which proved a costly embarrassment for Europe's biggest insurer.

The architects of the Dresdner takeover in 2001 hoped to sell bank accounts to Allianz customers as well as products such as car insurance over the counter at bank branches.

Instead Dresdner racked up losses of more than 3 billion euros after the merger as cross-selling floundered.

In June last year Reuters reported that Allianz had begun to consider its options for Dresdner. The resulting jump in the insurer's share price reflected the degree of investor frustration with the botched takeover.

But finding a buyer has not been easy, mostly because of Dresdner's accident-prone investment bank, a business, said one insider, which Allianz had never intended to keep.