VIENNA, May 15 (Reuters) - U.S. investor Cerberus Capital [CBS.UL] on Tuesday sealed the 3.2 billion euro ($4.3 billion) acquisition of Austria’s fifth-largest bank BAWAG P.S.K. from Austria’s trade union federation OeGB, BAWAG said.
Cerberus agreed to buy BAWAG in December, outbidding German state-owned bank BayernLB [BAYLB.UL] and private equity firm Lone Star [LS.UL] in an auction. BAWAG’s domestic peers all bowed out of the auction.
“The closing provides both a solid and sound basis for BAWAG,” said BAWAG Chief Executive Ewald Nowotny in a statement. “The Cerberus-led consortium provides new possibilities and growth perspectives for the bank.”
BAWAG’s new owners — which also include postal service Austrian Post (POST.VI), insurer Generali (GASI.MI), mortgage bank Wuestenrot and Austrian industrialists — paid 2.6 billion euros to OeGB and will inject 600 million euros of fresh cash to prop up BAWAG’s depleted balance sheet.
The deal ends the OeGB’s decades-long engagement in retail businesses that once formed an integral part of Austrian working class life but whose mismanagement eventually cost the movement billions of euros and a steep credibility loss.
The OeGB put BAWAG up for sale last year after a probe into collapsed U.S. futures trader Refco Inc RFXCQ.PK, a BAWAG affiliate, unveiled losses BAWAG had hidden for years using offshore vehicles and an unpublished guarantee by the OeGB.
Top OeGB and BAWAG officials resigned. A later investigation by Austria’s central bank said BAWAG had lost as much as 1.8 billion euros in failed bets against the yen and in derivatives dealings that went awry in the late 1990s.
A lawsuit by Refco creditors last April triggered a run on BAWAG which was only stopped when the government orchestrated a bailout. Clients withdrew 3.6 billion euros in savings over the course of last year, 20 percent of all savings deposits.
The Refco creditors later settled with BAWAG for a payment of $683 million, which was topped up by another $200 million because OeGB sold the bank at a higher price than expected.
Court proceedings against BAWAG’s then chief executive, Helmut Elsner, fund manager Wolfgang Floettl and other bankers involved in the losses and their cover-up will start in July. The defendants say they have done nothing illegal.