Germany's biggest bank, Deutsche Bank, has announced it will offer 25 euros a share to up its stake in retail bank Postbank. The bid will be paid for by a 10.2 billion euro capital increase.
Buying Postbank will boost Deutsche's retail arm
Investors in Postbank will be able to sell their shares to Deutsche Bank at 25 euros a piece from Wednesday. Germany's financial regulator BaFin on Tuesday set the price based on a three month average.
Deutsche Bank already owns 29.95 percent of Postbank and is looking to take control of the bank, which has the largest retail network in the country.
Tuesday's announcement applies to the roughly 30 percent of shares owned by various private and institutional investors, known as free float. Those investors have until October 5 to sell their shares.
Biggest ever cash call
Deutsche Bank will finance its bid via a capital increase worth 10.2 billion euros ($13.4bn). On Monday, the bank announced it would issue 308.6 million new shares at 33 euros a piece.
Investors will be able to buy one new share for every two they already own in what is Deutsche Bank's biggest ever cash call to investors.
Deutsche Post still owns 39.5 percent of Postbank
The remaining 39.5 percent stake in Postbank belongs to Deutsche Post. In September 2008, Deutsche Post agreed to sell that stake to Deutsche Bank for 45 euros per share by 2013. At the time, Postbank's value was higher and Deutsche Bank will have to honor that price.
Deutsche Bank is keen to boost its customer base in Germany. Taking over Postbank means the combined bank will have 24 million retail clients, more than any other bank in Germany. At present, Deutsche Bank's focus is on investment banking.
The takeover will also help boost Deutsche's capital base. New global banking rules, known as the Basel III accord, require banks to hold more capital. The agreement stipulates that banks will have to hold common equity equivalent to at least seven percent of their assets by 2019.
That is more than triple the two percent required at the moment and is meant to shield banks from another financial crisis by acting as a cushion for potential losses.
Author: Nicole Goebel (dpa/AFP/dapd)
Editor: Stuart Tiffen