October 30, 2013 / 1:41 PM / in 4 years

Regulator dashes hopes for quick BHF-Bank sale to RHJI

BRUSSELS/FRANKFURT (Reuters) - Kleinwort Benson owner RHJ International RHJI.BR faced a new regulatory delay on Wednesday in its attempts to buy Deutsche Bank’s (DBKGn.DE) BHF-Bank, stalling a process which has already lasted two years.

The hold up in a deal valued at 354 million euros ($487 million) in its latest shape came after German regulator Bafin said a modified offer would have to be re-submitted afresh.

“For that reason, no decision is to be expected in the short term,” a Bafin spokesman said.

Those comments came hours after Kleinwort retooled the deal to exclude former co-investor Blackrock (BLK.N) to meet regulatory concerns, and said it was confident of approval in the coming weeks.

The saga raises questions about how open Bafin is to foreign bank takeover offers and prolongs Deutsche Bank’s role as stepmother to BHF, which Germany’s flagship lender hopes to shed as part of wider efforts to reduce its balance sheet size.

Deutsche Bank declined to comment specifically on Bafin’s response, saying it still aimed to sell BHF. Deutsche is conducting a wider restructuring designed to boost returns and lower its regulatory capital requirements.

“We are confident that the sale will be a success,” a spokesman said.

RHJI announced exclusive talks to buy BHF from Deutsche Bank in June 2011, only to see Bafin refuse the deal, citing concerns about BHF’s ability to withstand a crisis on its own.

RHJI beefed up its offer in September 2012 by bringing in more investors including China’s Fosun Group (0656.HK), BMW heir Stefan Quandt, and funds controlled by U.S. investor Timothy C. Collins and Blackrock.

In 2011, Bafin also scotched Deutsche Bank’s initial plan to sell BHF to LGT LGTGFB.UL, a bank owned by the royal family of Alpine principality Liechtenstein. LGT and BHF had drawn up a ready-to-sign agreement but decided not to pursue it following a conversation with the Bonn-based regulator.

    Deutsche has sought a buyer since it inherited BHF with its 1 billion euro purchase of Sal. Oppenheim in March 2010.

    Under the latest proposal, Kleinwort Benson would acquire 91 percent of BHF for 322 million euros in cash, while RHJI would acquire the remainder by issuing shares to Deutsche Bank.

    RHJI and the remaining co-investors agreed to raise their funding to step into the breach left by Blackrock’s departure.

    One of the people familiar with the approval process told Reuters in August that Bafin had asked Blackrock to provide details about how it would support BHF in a crisis.

    ($1 = 0.7262 euros)

    Additional reporting by Ludwig Burger and Edward Taylor, Writing by Thomas Atkins, Editing by David Cowell and David Holmes

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