BAWAG being sold to Cerberus for $3.4 billion

By Boris Groendahl

VIENNA (Reuters) - Austria's fourth-largest bank BAWAG P.S.K. is being sold to a group of investors led by U.S. buyout fund Cerberus Capital Management CBS.UL, the head of trade union OeGB, which owns BAWAG, said on Thursday.

OeGB President Rudolf Hundstorfer declined in a news conference to name the price the group agreed to pay for

BAWAG.

Sources familiar with the deal said the group would pay 2.6 billion euros ($3.4 billion), and inject an additional 600 million euros in fresh cash to prop up BAWAG's depleted balance sheet.

Cerberus beat rival Lone Star LS.UL and German state-owned bank BayernLB BAYLB.UL in the BAWAG auction, launched by the OeGB this spring after a series of accounting scandals threw the union into political and financial disarray.

Hundstorfer said one reason for the decision to sell to the

Cerberus group was that it included Austria-based members --

mortgage bank Wuestenrot, insurer Generali's (GASI.MI) Austrian arm and Austrian investor Hannes Androsch.

All major Austrian players, including BAWAG's four biggest domestic rivals, dropped out of the auction earlier.

The Austrian investor, Hannes Androsch, Austrian finance minister in the 1970s, said the price was "not a bargain."

"It will be a great effort to justify this price -- and this means at the end of the day to earn it," Androsch said at the news conference.

BAWAG Chief Executive Ewald Nowotny said he welcomed the buyer because the sale to the Cerberus group meant the bank was kept intact and based in Austria -- rather than being broken up or made a subsidiary of a foreign bank.

"There is also the perspective that the bank may be sold in an initial public offering in some years in the future," Nowotny said in the news conference.

DISTRESSED

Cerberus began as a distressed debt investment firm but has since become a powerful hedge fund and private equity investor. It has deep experience with investing in struggling businesses across all sectors.