New Deutsche Bank Investor Cerberus Doubles Down on German Lenders

By Jenny Strasburg Features Dow Jones Newswires

U.S. private-equity firm Cerberus Capital Management LP on Wednesday disclosed a 3% stake in Deutsche Bank AG, deepening its bets on European banks and the German economy.

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The investment, worth roughly EUR978 million ($1.2 billion) at Wednesday's closing share price, made Cerberus the bank's No. 4 shareholder. The roster is led by a Chinese conglomerate, members of the Qatari royal family and U.S. asset manager BlackRock Inc.

This summer, Cerberus disclosed a roughly 5% stake in Germany's No. 2 lender, Commerzbank AG. Cerberus manages more than $30 billion in assets.

The firm said Wednesday in a statement that Germany is a "highly attractive place to invest." It cited "attractive long-term opportunities in retail and corporate banking due to Germany's robust economy, high savings rate, and a number of other factors."

"We welcome every investor who believes in the value potential of the Deutsche Bank share," Deutsche Bank said in a statement.

Deutsche Bank shares rose on the news, climbing 1.9% for the day, to EUR15.76. The shares are up 2.4% this year, after a brutal 2016 hampered by questions about strategy, unsettled legal battles and the bank's capital position.

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Earlier this year Deutsche Bank raised $8.5 billion in a share sale and refreshed its strategy, which now includes a multiyear process of combining its big German retail-banking operations.

There was no indication Wednesday that Cerberus has communicated with Deutsche Bank beyond formally notifying the bank of its share position, a person briefed on the communications said.

Still, Cerberus's recent arrival to Germany to amass a roughly $2 billion combined stake in its two biggest lenders will fuel speculation that the banks could talk about a potential merger -- if not now, then down the road -- analysts and investors said. Some said Cerberus can be patient, citing its 2006 purchase of Austrian retail bank Bawag PSK for about EUR3.2 billion.

Bawag raised EUR1.9 billion last month in Austria's biggest-ever initial public offering, which valued the company at EUR4.7 billion. Cerberus retains a significant stake.

Commerzbank, with advisers, has been evaluating its strategic options, people close to the bank say. After a 2008 bailout, Commerzbank remains around 15% government owned, and has long been the subject of merger speculation. Its executives have declined to comment on the speculation or on discussions with shareholders. A spokeswoman declined to comment Wednesday. The bank's shares rose 1.8% Wednesday, to EUR11.87.

Bankers say financial executives in general have warmed to the idea of potential big European bank mergers, both domestic and cross-border. Some bankers and finance executives say combining all or big portions of Deutsche Bank and Commerzbank would be too messy, unwieldy or politically unacceptable, though others say such a move can't be ruled out. Speculation about cross-border mergers, with German banks or otherwise, also has focused on French and Italian banks.

Executives of Commerzbank and Deutsche Bank held preliminary talks in August 2016 about a potential tie-up, but concluded it wasn't viable, The Wall Street Journal and others reported at the time, citing people familiar with the matter. Since then Deutsche Bank said it would integrate its big Postbank retail-banking business in Germany, after earlier planning to shed it.

Write to Jenny Strasburg at jenny.strasburg@wsj.com

(END) Dow Jones Newswires

November 15, 2017 14:43 ET (19:43 GMT)