Allianz, Dresdner deal close

Allianz, Dresdner deal close
Board of German insurer approve $21 billion take over of Dresdner
April 1, 2001: 7:44 a.m. ET


FRANKFURT (Reuters) - Allianz moved closer to taking over Germany's third largest bank, Dresdner Bank, after its supervisory board approved the insurer's 23.4-billion-euro ($21 billion) friendly bid.

The proposal, which would create one of Europe's largest financial groups and remake Germany's financial landscape, now moves to Dresdner Bank's (FDRB) supervisory board where it will almost certainly be approved on Sunday with details confirmed on Monday.

"There was unanimous approval in the supervisory board," an Allianz supervisory board member told Reuters.

To pay for the deal, Allianz (FALV) is mulling a temporary capital increase of 8 billion. Allianz would then buy back the shares in about one year, the source said.

According to the terms of the deal, Allianz will offer one of its shares plus 200 for every 10 Dresdner shares, the source said.

Reuters calculations show that the offer values Dresdner at 53.10 per share -- or 29.7 billion -- based on an Allianz share price of 331.

The bid comes at a 15 percent premium over Dresdner's closing share price of 45.99 on March 27, the day before the takeover story was reported. 젨

The new financial giant with a combined market capitalisation of 109.6 billion would be second in Europe only to HSBC Holdings (HSBA) with a market value of 122.8 billion, Reuters Securities 3000 data show.


Structure

The deal is also expected to involve a complex swapping of cross-shareholdings, allowing Allianz to reduce some of its non-core assets. 젨

Allianz is expected to take back its 44 percent stake in its principal German life insurance unit Allianz Leben from Munich Re (MUV)

Allianz is also expected to reveal early plans on how it will manage its combined industrial holdings, reported to be worth 44 billion.

Allianz has made no secret that it plans to reduce its excess holdings in German blue chips, spreading some of them more widely in other investments and devoting a large part to building up its core business. 젨Sources say Allianz plans to integrate Dresdner into the group with a high degree of autonomy and that no layoffs are expected in the deal.

The supervisory board source said that Allianz expected no significant cost savings from the deal.

Three Dresdner Bank management board members will be pulled on to Allianz's board: CEO Bernd Fahrholz, risk management chief Horst Mueller, and the head of Dresdner Kleinwort Wasserstein, Leonhard Fischer, the source said. Earlier on Saturday, German magazine Focus said Dresdner would delist once the bank was absorbed by the insurer.


Shake-out

The deal is expected to have huge consequences for the German financial sector, creating several financial giants likely to compete fiercely at home and abroad for market share.

Re-insurer Munich Re has said it plans to fortify ties to partner HypoVereinsbank (HVM) in the wake of the Dresdner-Allianz tie-up, creating a second bancassurance giant.

Munich Re said it would seek to increase its stake in HypoVerein to 26 percent but not seek majority control, choosing a different strategic path from Allianz.

Germany's largest bank, Deutsche Bank (DBK), busy fortifying retail and investment banking activities, may feel the heat from its new larger rivals while fourth-ranked Commerzbank (CBK) looks increasingly isolated.

Analysts say the deal puts Allianz in position to exploit surging demand for savings products following German pension reforms. Allianz already controls French insurer AGF (PAGF) and Italy's second-largest insurer RAS.

According to unconfirmed media reports, Allianz plans to forge ties to Consors Discount Broker, which may include taking a stake in or taking over the firm, Europe's second-largest direct broker, according to media reports. Consors declined to comment on the reports.