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Head of Commerzbank Defends Price Paid for Dresdner

Commerzbank Chief Executive Martin Blessing has defended the price Germany's second-largest bank paid to take over rival Dresdner, in the country's biggest shake-up in the banking sector.

The Commerzbank branch in Frankfurt

The banks announced the sale price on Sunday Aug. 31

In an interview with German news magazine Der Spiegel, Blessing described the 9.8 billion euros ($14.4 billion) paid to insurer Allianz as "not cheap but fair," highlighting the fact that much of the deal had been done with Commerzbank shares. In addition, the new bank aimed to realize synergies worth 5 billion euros, he said.

Analysts were critical following Sunday's deal, and Commerzbank's shares dived to trade as low as 16.66 euros during Friday trade in Frankfurt. On Friday Aug. 29, the last day of trading before the widely anticipated announcement, Commerzbank had traded in a range around 20 euros.

The new bank, which aims to challenge the dominance in Germany of Deutsche Bank through its widespread branch network, aims to shed some 9,000 of its staff complement of 67,000 full-time employees.

Regarding the reported interest shown in Dresdner Bank by the state-owned China Development Bank, Blessing told the weekly: "If there had been a game of bluff over the price with a bank backed by the Chinese state, we would not have had a chance."

A new banking force

He said there would be substantial cuts at the London-based Dresdner investment banking unit Dresdner Kleinwort, but refused to be drawn on a potential purchaser for the subsidiary, which has been hit by the US subprime crisis.

On Monday, German Finance Minister Peer Steinbrueck welcomed the deal. "This is good for Germany as a financial location," Steinbrueck said from Beijing where he was meeting Chinese officials.

With total assets of about 1.09 trillion euros and 11 million German customers, a merged Commerzbank-Dresdner will result in the emergence of new banking force in Europe's biggest economy. Deutsche Bank, which failed in a bid to merge with Dresdner eight years ago, remains the largest bank in Germany with assets totaling about 2 trillion euros.

Munich-based Allianz, Europe's biggest insurer, is to retain a stake of about 30 percent in the new banking group and to take over risks totaling 975 million euros which are linked to the global financial crisis and credit crunch.

Allianz paid about 23 billion euros for Dresdner in 2001 as part of an ambitious plan to sell its pension and insurance schemes through Dresdner's branch network.

Analysts see the Dresdner-Commerzbank deal as a prelude to the two banks' launching a bid for Deutsche Postbank, which has 14.5 million customers and more than 800 branches.

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