Dexia Breakup May Bring Takeover Prospects for RBC, Aiken Says

Dexia SA (DEXB)’s planned breakup raises the prospect of a takeover of some businesses by Royal Bank of Canada (RY), Barclays Capital analyst John Aiken said.

“With Royal actively pursuing a strategy of global expansion in wealth management, Dexia’s operations might be attractive under certain conditions,” Aiken said today in a note to clients.

Dexia, Belgium’s biggest bank by assets, said its board asked Chief Executive Officer Pierre Mariani to take steps to fix the company’s “structural problems” after Europe’s sovereign debt crisis worsened. The board met yesterday to discuss the possible breakup of the company after the debt crisis reduced its ability to obtain funding, according to people with knowledge of the talks.

Royal Bank is the “likely bidder” for Dexia’s half of RBC Dexia Investor Services global custody partnership if the business were sold, Aiken said today in a note. The cost for Canada’s largest lender to buy the other half of the venture may be C$300 million ($283 million) to C$400 million, Aiken estimated.

Canada’s biggest bank may alleviate risks of losing potential European mandates in a RBC Dexia takeover by also buying Dexia’s asset management operations, Aiken said. That business may cost between C$1 billion and C$1.5 billion, he said.

Asset Management

“The potential acquisition of Dexia’s asset management operations would fit well with Royal’s stated strategy and would protect much of the global custody’s business,” Aiken said. “However, it is unlikely that Royal would be the only interested party.”

A Dexia restructuring is unlikely to have an impact on the operations of RBC Dexia, Aiken said.

Last month, Royal Bank CEO Gordon Nixon said in an interview that he’s “very committed” to the RBC Dexia partnership, calling it “a very complimentary strategic business” for the Toronto-based bank.

“The joint venture that we have with Dexia is a strong and growing business, and we remain committed to growing it further,” Royal Bank spokeswoman Katherine Gay said today in an interview.

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; David Scanlan at dscanlan@bloomberg.net

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