FRANKFURT (Reuters) - Commerzbank (CBKG.DE) shares surged by as much as 19 percent on Friday after the German bank sealed its takeover of Dresdner Bank months ahead of schedule and for less than market participants had feared.
Commerzbank will pay insurer Allianz (ALVG.DE) just over 5 billion euros ($6.6 billion) in a deal some have greeted with skepticism in the face of the global financial crisis.
The transaction was valued at around 9 billion euros when it first emerged in August, creating a player to rival German flagship Deutsche Bank (DBKGn.DE).
Allianz paid 24 billion euros for Dresdner in 2001 but has had only trouble since as the bank lost billions of euros.
“We see the agreement (as) positive as it closes this unfortunate chapter earlier and thus seems to create a win-win situation for Commerzbank and Allianz,” Equinet analyst Christian Muschick said in a note to clients.
Commerzbank shares came off session highs but were still up 5.9 percent at 7.29 euros by 1105 GMT, the leading gainers among German blue chips .GDAXI. Allianz gained 6.3 percent.
The Dresdner purchase price has dropped due to the collapse in Commerzbank’s shares, which had fallen two-thirds since the deal first broke. The value of banks such as Dresdner has also been decimated after Wall Street’s Lehman Brothers folded.
Commerzbank will pay Allianz 1.4 billion euros in cash for the remaining 40 percent of Dresdner rather than in new shares as first agreed. This means Allianz’s stake in the merged group remains at 18.4 percent instead of rising to near 30 percent.
Commerzbank is also paying Allianz 250 million euros for dropping a risk umbrella for Dresdner agreed in August.
“The main driver for (Commerzbank’s) share price is that there will be no further capital hike and therefore no further shareholder dilution,” FrankfurtFinanz analyst Heino Ruland said.
Marc Thiele from UBS said it was good for Allianz to get more cash for Dresdner rather than more Commerzbank shares.
The global economic crisis forced Commerzbank to turn to the German government for capital. It took 8.2 billion euros from Berlin to prop up flagging finances, making it easier to pay for the second tranche of Dresdner.
The sale concludes a costly lesson for Allianz for dabbling in bank ownership.
The new terms of the deal will hit Allianz fourth-quarter results by around 600 million euros in write-downs, it said.
“In the current situation on the financial markets an accelerated takeover of Dresdner by Commerzbank is to the advantage of all parties,” Allianz Chief Executive Michael Diekmann said in a statement late on Thursday.
Allianz said the takeover could now go ahead six to nine months ahead of plan.
When the deal was first announced, analysts and insiders had expressed skepticism over whether the pairing of what many see as two mediocre performers could create a financial champion.
Nonetheless the sale will give Commerzbank a badly needed leg-up in its home market, which is dominated by state not-for-profit lenders, and let Allianz end an unhappy marriage that unsuccessfully tried to match investment bankers with insurance salesmen.
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 was not easy, mostly because of Dresdner’s laggard investment bank — a business which had struggled even before the financial markets storm.
Reporting by John O'Donnell and Ludwig Burger; Editing by Mike Nesbit