Deutsche Bank plans to raise as much as €1.8bn ($2.2bn) in an initial public offering of its asset-management unit, a key pillar of the German lender’s turnaround strategy.
The offering values the asset manager at as much as €7.2bn, a valuation that would align it with its bigger peer Amundi. Nippon Life Insurance Co agreed to acquire a 5% stake in DWS in the IPO at the issue price that will be set between €30 to €36 a share, Deutsche Bank said in a statement late on Sunday.
A successful offering of DWS after a surge in market volatility would mark an important achievement for Deutsche Bank chief executive officer John Cryan, who proposed the sale a year ago to help bolster the lender’s capital. The unit - headed by Nicolas Moreau - will also gain more independence and flexibility for acquisitions at a time when firms are under pressure to expand.
If priced in the top half of the range, DWS would achieve a similar valuation to French asset manager Amundi, which has about double DWS’s assets. Companies typically sell shares at a discount to their target valuation to lure buyers.
“I had expected a target valuation of up to €8bn so the given range is not very ambitious,” said Ulf Moritzen, an portfolio manager at Aramea Asset Management with €3.5bn under management, including Deutsche Bank stock. “But I expect positive news flow after the IPO and would buy into it up to a valuation of €7bn.”
Attractions of DWS include its diversified portfolio across many asset classes and global scale, Barclays analyst Daniel Garrod wrote in a client note in late February. A return to net money outflows and failure to cut costs are major risks to the business, he said.
The unit has also had a mixed performance across regions. While assets under management in Germany have been increasing, with a particularly strong jump in the second quarter of last year, its US funds have yet to recover from the massive outflows suffered in 2016. DWS said it will enter into a strategic partnership with Nippon Life that will see the Deutsche Bank subsidiary manage some assets for the Japanese insurer. It will also involve joint product development and “opportunities for distribution,” according to the statement.
“Our strategic alliance is consistent with, and will help accelerate, our focus on growing in the Asia region,” Moreau said in the release.
Shares of Deutsche Bank climbed about 1% in Frankfurt trading to €13.16 yesterday. The stock is the second-worst performer this year on the 42-member Bloomberg Europe 500 Banks and Financial Services Index, with a decline of about 17%.
DWS has a 30% stake in a Chinese joint venture, Harvest Fund Management Co, but can’t consolidate the company’s more than $100bn in assets under management because it only has a minority stake.
Deutsche Bank tried to sell much of the asset management unit in 2012, but stopped when it couldn’t get enough money. Now the business is targeting net inflows of 3% to 5% of assets a year, a number that may be difficult to reach after several key funds saw recent outflows, according to Autonomous Research.
“A share price at the lower end of the range looks attractive at first glance,” said Philipp Haessler, an analyst with Equinet with a buy recommendation on Deutsche Bank stock. The bank will offer 40mn shares in DWS and may add another 10mn shares in an overallotment option, according to the statement.
Global IPOs are up about 25% this year compared with the same period in 2017. Companies sold $27.9bn of stocks this year through March 4, compared with $22.2bn a year ago at this time, according to data compiled by Bloomberg League Tables. The number of deals rose 2.5%.
Deutsche Bank will seek to cut as many as 6,000 jobs at its retail unit by the end of 2022, providing the first estimate for the expected staff reductions at the newly formed division, according to two people briefed on the matter.
LEAVE A COMMENT Your email address will not be published. Required fields are marked*
Saudi politics, oil and proxy wars: Mideast market risks in 2019
Saudi is said to target US with sharp oil exports cut
Thyssenkrupp fills key management posts
Wall Street investors look to Fed outlook to spark stock rally
Draghi’s $3tn QE bet isn’t a winner as economy wavers
Recession signs hard to miss if stock message taken seriously
After China’s P2P lending fiasco, Korea to adopt new rules
China Development Bank leads HNA asset sale team
Apple to update iPhones in China to avoid ban