Mon. Jan 24th, 2022

The American private equity group Cerberus reduced its interests in Deutsche Bank and Commerzbank by more than a third, as the group scaled back a five-year, fatal bet on Germany’s two largest lenders.

The buyout firm offered 21 million shares in Deutsche Bank and 25 million shares in Commerzbank via Morgan Stanley late Monday, according to a document seen by the Financial Times.

The deals will leave Cerberus with a 2 percent stake in Deutsche Bank, down from 3 percent, while its stake in Commerzbank is now at 3 percent, according to Reuters data.

New York-based Cerberus announced its interests in 2017, gambling on a quick recovery from Germany’s sick banking sector as well as a potential merger of Frankfurt-based competitors.

In 2019, Frank Bruno, co-CEO of Cerberus, told the FT in a rare interview that the firm did not believe “that German banks can not earn their cost of capital”, adding that to achieve this “does not require incredibly sophisticated solutions. It is basic blocking and tackling and doing things that are done by many other banks in Europe and in the USA. ”

However, as interest rates fell further and lenders’ costs remained high, a revival for the banks did not succeed. After abandoning a bond negotiation in 2019, both banks embarked on costly restructuring programs.

Despite a recovery in both stocks over the past two years, Cerberus has suffered paper losses on investments of € 400 million since it first announced in 2017, according to a Financial Times calculation based on the closing prices around the announcement dates.

When Cerberus first announced its interests, it was worth € 1.6 billion, compared to € 1.2 billion, based on Monday’s closing prices.

According to the document on the sale seen by the FT, Cerberus has committed to keep its remaining interests in both banks for at least 45 days. Bloomberg first reported on sales of the stake.

The relationship between Cerberus and the banks was rocky, with the buyout firm unsuccessfully pleading for their merger. After the lenders abandoned the idea, Cerberus stirred for removal of Deutsche Bank Chairman Paul Achleitner and try to install former Morgan Stanley president Colm Kelleher as his successor in 2020.

In the summer of the same year it is launched an attack about Commerzbank’s leadership and called for two seats on its supervisory board to “prevent Commerzbank’s downfall”.

Both Commerzbank CEO Martin Zielke and Chairman Stefan Schmittmann resigned in a subsequent council chamber war, which pushes the borrower into a half-year leadership vacuum that only ended in January 2021 with the beginning of the new CEO of Commerzbank, Manfred Knof.

The private equity group, Morgan Stanley, Deutsche Bank and Commerzbank, declined to comment.

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