Cerberus to Sell Large Stakes in Deutsche Bank and Commerzbank
(Bloomberg) -- One of the biggest shareholders in German banking giants is scaling back an investment that hasn’t panned out in the last four years.
Cerberus Capital Management is selling shares in Deutsche Bank AG and Commerzbank AG worth about 450 million euros ($509 million), according to terms seen by Bloomberg. The U.S. buyout firm is selling about a third of its holding in Deutsche Bank and a slightly higher amount in its rival.
The shares of both banks fell Tuesday, with Commerzbank declining as much as 3.3% and Deutsche Bank as much as 2.3%.
Cerberus acquired stakes in Germany’s largest publicly listed lenders in 2017 and has been a vocal investor as both firms underwent turnarounds. The firm supported a move by the German government to drive a merger of the two banks almost three years ago, according to people with knowledge of the matter at the time.
But the stocks have struggled in recent years as interest rate increases in the euro area failed to materialize and the two banks pursued separate turnaround plans with varying degrees of success.
Deutsche Bank’s shares are down a little more than 20% since the day before Cerberus disclosed its stake and Commerzbank has declined over 30%.
Cerberus will likely sell Deutsche Bank shares for 12.06 euros apiece and Commerzbank at 7.50 euros, according to terms seen by Bloomberg. That valuation would translate into a paper loss of about 420 million euros ($475 million) on the firm’s entire stakes in the two lenders since they were first disclosed in 2017.
The actual return on the investment likely differs because it depends on many factors that aren’t publicly available, such as the cost at which the shares were purchased and how the investment is structured. Both stocks have recently soared as interest rate expectations in the euro area have increased, with Commerzbank hitting its highest in almost two years on Monday.
Cerberus played a pivotal role last year in the joint resignation of Commerzbank’s two top leaders -- CEO Martin Zielke and Supervisory Board Chairman Stefan Schmittmann -- when it waged a campaign based on the lender’s poor performance. It later opposed Schmittmann’s replacement but was overruled by the German government, which is Commerzbank’s largest shareholder.
The private-equity firm, led by Stephen Feinberg, also had a consulting mandate with Deutsche Bank that made it a key adviser in its turnaround strategy under Chief Executive Officer Christian Sewing. That contract ended in late 2019 while Sewing -- whose turnaround has been helped by strong fixed income markets -- is set to present a strategy update in the spring.
Cerberus is selling about 21 million shares in Deutsche Bank, where it has a stake of about 62 million. In Commerzbank, where it holds about 63 million shares, it’s selling approximately 25 million shares, the terms showed.
The U.S. firm will continue to hold a stake of about 2% in Deutsche Bank and of about 3% in Commerzbank though it may continue to sell more after a 45-day lockup period, according to the terms. That compares with pre-sale stakes of about 3% and of about 5%, respectively.
Read More: Cerberus Activist Pivot Ejected Commerzbank Leaders Within Weeks
Cerberus’s sale of the shares in the two banks is also likely to damp speculation that the firm might buy the government’s stake in Commerzbank. Cerberus signaled in private talks last year that the firm would be willing to examine a deal for the stake under the new German government, Bloomberg has reported.
The sale is through accelerated bookbuild offerings handled by Morgan Stanley, according to the terms seen by Bloomberg.
©2022 Bloomberg L.P.