Dresdner OKs $20.65-Billion Takeover Bid From Allianz
Dresdner Bank on Sunday approved a $20.65-billion takeover offer from European insurer Allianz to become the world’s fourth-largest financial services group.
By buying Germany’s No. 3 bank, Munich-based Allianz creates a company with 24 million customers and 13,000 outlets through which it can sell banking and insurance products.
But although it will be the No. 4 financial firm by market value, Allianz will be only half the size of world financial services leader Citigroup Inc. and trail U.S. insurer American International Group and British bank HSBC Holdings.
Without a major acquisition in the United States, Allianz will be one step behind in the global race to gather assets--in the form of insurance premiums, mutual funds, annuities and other investments--and will struggle to achieve the Holy Grail of bank-insurance mergers: cross-selling products to an expanded base of customers on an international scale.
The German firm, however, does have a strong position in asset management in the U.S. after spending nearly $6 billion last year to buy U.S. money managers Pimco Advisors of Newport Beach and Nicholas-Applegate Capital Management, based in San Diego.
Those transactions help put Allianz in the global elite of asset management, with about $850 billion under management worldwide, on par with U.S. fund giant Fidelity Investments. But Allianz still lacks a bank or insurance distribution system outside of Europe to make the most of cross-selling opportunities.
Allianz will get no U.S. bank network with Dresdner and will remain an all-but-invisible player in U.S. insurance. Its main U.S. property-casualty operation, Fireman’s Fund Insurance Co., is barely in the top 20, and its life insurance operations, under Allianz Life Insurance Co. of North America, ranks 51st among U.S. life and health insurers.
Nonetheless, Allianz’s surprise bid for the 80% of Dresdner it doesn’t already own shattered decades-old alignments in corporate Germany, provided a safe harbor for Dresdner and paved the way for a dramatic transformation of the European financial landscape.
Allianz already owns a 21.4% stake in Dresdner, while Dresdner holds a 10% stake in Allianz.
Dresdner’s management board recommended that shareholders accept the cash and stock bid from the firm’s biggest shareholder, which values the bank at $46.90 euros per share, or $26.2 billion.
“Allianz and Dresdner Bank will bundle their forces and in [the] future focus on the three core areas: insurance, asset management and banking,” the companies said in a statement.
Allianz, which would have a market capitalization of $97 billion after the deal, said it would offer one of its shares plus 200 euros for every 10 Dresdner shares, confirming details revealed to Reuters over the weekend. The bid offers a 15% premium over Dresdner’s closing share price of 45.99 euros Tuesday, the day before news of merger talks was reported.
Further details are expected at a joint news conference this morning in Frankfurt.
Sources said that Allianz plans to integrate Dresdner into the group with a high degree of autonomy and that no layoffs and no significant cost savings are expected in the deal.
The announcement comes a year after Dresdner Bank tried and failed to sell itself to Deutsche Bank.
The plan collapsed over disagreements on what to do with Dresdner’s investment bank. The two banks would have slashed a combined 16,000 jobs.
Dresdner Chief Executive Bernd Fahrholz and board members Horst Mueller and Leonhard Fischer, head of its investment banking unit Dresdner Kleinwort Wasserstein, will join the management board of Allianz.
The deal involves a four-way swap of strategic assets and is expected to have huge consequences for the German financial sector, creating several financial giants that probably will compete fiercely for market share at home and abroad.
As part of the deal, insurer Munich Re will swap its 40% stake in Allianz’s principal German life insurance arm, Allianz Leben, for Allianz’s 13.3% stake in HypoVereinsbank.
