A major legal battle for the ownership of German bank Hypo Real Estate is looming after a major investor rejected a bid from the German government.
A major US investor in HRE has vowed to challenge government plans to nationalize the bank
US private equity firm JC Flowers & Co has rejected a German government takeover bid for the beleagured lender Hypo Real Estate, claiming that the government's offer of 1.39 euros ($1.85) per share is too low.
Shareholders of HRE have until Monday to sell their stock to the government for a total of 290 million euros. The Flowers company said on Thursday that it now expects to mount a legal challenge to the bank's nationalisation.
German finance minister Peer Steinbrueck vowed that the goverment would simply nationalize HRE if Flowers & Co refuses to accept the government's share-price offer, which Steinbrueck described as "very fair".
HRE became the most prominent German victim of the global credit crisis last September after its Ireland-based unit Depfa Bank failed to find short-term funding.
Since then the German government has shored up troubled HRE with loan guarantees and cash injections totalling 102 billion euros.
The German government has passed temporary legislation to nationalize HRE if a voluntary sale fails. Berlin owns around 9 percent of HRE and JC Flowers and allies are believed to hold around 22 percent of the company. The rest of the shares are in the hands of private and institutional investors.