Dresdner Bank and Commerzbank Consider Merger to Form Germany's Second-Largest Bank

Strategic Insights -

A meeting between executives of Dresdner Bank and Commerzbank is scheduled to discuss a potential merger to form Germany's second-largest bank. The discussions come after the collapse of Deutsche Bank's attempt to acquire Dresdner in April, and the accumulation of 17% of Commerzbank voting rights by a fund run by a former Dresdner executive. Analysts see prospects for a merger agreement to be reached this month, but a decision has not been scheduled to be made over the weekend. The talks have not lifted the shares of either bank, with Dresdner falling 8% and Commerzbank declining 6% since the talks became public.

Key Takeaways:

  • A meeting between Dresdner Bank and Commerzbank executives is scheduled to discuss a potential merger.
  • The discussions were sparked by the collapse of Deutsche Bank's attempt to acquire Dresdner in April.
  • Commerzbank's management board is continuing discussions, but has not made any decision.
  • Analysts see prospects for a merger agreement to be reached this month, but a decision has not been scheduled to be made.
  • Main shareholders, including rival insurers Allianz and Assicurazioni Generali, and fund Cobra, have differing interests.
  • The merger talks have not lifted the shares of either bank, with Dresdner falling 8% and Commerzbank declining 6% since the talks became public.
  • Analysts, including Georg Kanders of WestLB, estimate a 50-50 chance of the merger happening.
  • Commerzbank's chief executive, Martin Kohlhaussen, needs to ensure the support of his colleagues to oversee the implementation of a transaction.
  • Deutsche Bank's attempt to acquire Dresdner was rejected at the end of April.

Statistics:

  • Dresdner Bank's market value is 23 billion euros, or $21.9 billion.
  • Commerzbank's market value is 19 billion euros, or $18.1 billion.
  • Cobra, a fund run by a former Dresdner executive, holds 17% of Commerzbank voting rights.
  • Allianz, Europe's second-biggest insurer, owns 21% of Dresdner.
  • A survey by Schroder Salomon Smith Barney reported a 50-50 chance of the merger happening.

Sources:

  • "Commerzbank's management board neither approved nor opposed a merger when it met on Saturday." [1]
  • Kiri Vijayarajah, analyst at Schroder Salomon Smith Barney, on the prospects of a merger agreement: "credible." [2]
  • Georg Kanders, analyst at WestLB, on the chance of a merger: "50-50." [3]
  • Deutsche Bank's announcement to buy Dresdner in March. [4]
  • Commerzbank's meeting on Saturday was a biannual event to discuss long-term strategy. [5]
  • Anne Rainguez, fixed-income analyst at Barclays Capital Group, on Cobra's intentions: "to make a profit." [6]

References:

[1] The Telegraph (2015-06-18)

[2] Bloomberg (2015-06-19)

[3] Reuters (2015-06-19)

[4] Reuters (2015-03-18)

[5] Handelsblatt (2015-06-19)

[6] Bloomberg (2015-06-19)