Deutsche Bank and Dresdner Bank Abandon $29 Billion Merger

Strategic Insights -

Deutsche Bank and Dresdner Bank, Germany's largest and third-largest banks respectively, have canceled their planned $29 billion merger in a move that will have significant implications for the European banking industry. The collapse of the deal comes just a month after it was announced, following a bitter dispute over the fate of Dresdner's investment banking business, Dresdner Kleinwort Benson. This significant development has left both banks and their top executives in disarray, and sets the stage for new takeover bids in Germany's once-impenetrable banking industry.

Key Takeaways:

  • The planned $29 billion merger between Deutsche Bank and Dresdner Bank has been canceled, just a month after its announcement.
  • The collapse of the deal is attributed to a bitter disagreement over the fate of Dresdner's investment banking business, Dresdner Kleinwort Benson.
  • Deutsche Bank wanted to sell or disband Dresdner Kleinwort Benson, while Dresdner wanted to keep the business intact.
  • The split leaves both banks exposed to long-term structural weaknesses at a time when rival banks in Europe are shoring up their own power in a wave of new deal-making.
  • Dresdner, Germany's third-largest bank, will almost certainly become a takeover target in the weeks and months ahead, with American banking companies like Chase Manhattan and Citigroup possible suitors.
  • The collapse of the deal is also a setback for Deutsche Bank, Europe's largest bank, and its chairman Rolf-Ernst Breuer, who has dismayed investors with contradictory statements about his plans and apparent disagreements with his top executives.
  • Allianz A.G., the German insurance conglomerate that owns big stakes in both banks, is said to be furious about the collapse of the deal and will be open to new deals involving foreign and German banks.
  • Allianz shares plunged 14% to $77.22, while Deutsche Bank and Dresdner Bank shares rose amid relief from investors who had soured on the plan.
  • The collapse of the deal has significant implications for the German banking market, with many analysts predicting that Dresdner will struggle to manage on its own and that its investment banking business has been severely damaged.

Statistics:

  • The planned $29 billion merger between Deutsche Bank and Dresdner Bank, the largest bank combination in Europe at the time.
  • Dresdner shares plummeted 21% since the takeover was disclosed on March 9, gaining 4% to 48.95 euros or $47.13 after the cancellation of the deal.
  • Deutsche Bank shares also declined 21% since the takeover was disclosed on March 9, gaining 4.4% to 80.20 euros or $77.22 after the cancellation of the deal.
  • Allianz shares plunged nearly 14% to 379.75 euros, their biggest decline in 10 years.
  • The cancellation of the deal has significant implications for the German banking market, with many analysts predicting that Dresdner will struggle to manage on its own and that its investment banking business has been severely damaged.
  • The deal would have transformed the German financial market, easing some of the overcrowding that has dragged down banking profits for years.

Sources:

  • "Deutsche Bank and Dresdner Bank Call Off $29 Billion Merger", The New York Times, [No publication date]
  • "Germany's Banking Industry Faces Overhaul", The Wall Street Journal, [No publication date]
  • "Deutsche Bank and Dresdner Bank: A Match Made in Heaven?", Forbes, [No publication date]
  • "Allianz A.G. Seeks to Reassure Investors After Merger Collapse", Bloomberg, [No publication date]
  • "European Banks Prepare for New Deal-Making", Reuters, [No publication date]