The sale negotiations apply to the four businesses that the Frankfurt-based bank put under review, including DWS mutual funds in the Americas, the advisory units for institutional investors and insurance firms, and its RREEF real-estate and infrastructure division, the firm said in a Business Wire statement today.
Guggenheim Partners, founded with backing from the Guggenheim family, would more than quintuple its assets under management with a purchase of the businesses, which oversee almost 400 billion euros ($536 billion). Deutsche Bank (DBK), Europe’s biggest bank by assets, announced a review in November of the units, which may fetch 1.5 billion euros to 2 billion euros, according to people familiar with the talks. The lender plans to hold onto its DWS mutual-fund units in Europe and Asia.
“This transaction would be positive in conjunction with other moves Deutsche Bank is making to boost its capital levels,” said Matthew Czepliewicz, an analyst at Collins Stewart Hawkpoint Plc in London. “If Guggenheim is interested in bidding for the whole thing, that’s definitely better than a piecemeal sale. This would be a big takeover for them.”
Deutsche Bank shares rose as much as 1.9 percent in Frankfurt earlier today after Bloomberg News reported an announcement would be made on the exclusive talks with Guggenheim. The shares gained 0.7 percent to 35.08 euros at the close of trading.
Guggenheim has been competing with firms such as Macquarie Group Ltd. (MQG) of Australia to buy the units, according to people familiar with the process. JPMorgan Chase & Co. (JPM), State Street Corp. (STT) and Ameriprise Financial Inc. (AMP) were among companies previously looking at the assets, people with knowledge of the matter said in January. While Deutsche Bank seeks to sell the business as a whole, several companies also submitted offers for only parts of the business, they said.
Guggenheim, which is based in New York and Chicago, manages more than $125 billion of assets. The U.S. firm has more than 1,700 employees at over 25 offices in 10 countries, and is led by Chief Executive Officer Mark R. Walter, according to its website.
The units for sale include DB Advisors, an institutional money-management unit with 163 billion euros in client assets; Deutsche Insurance Asset Management, which oversees 142 billion euros; the RREEF unit, which specializes in real-estate and infrastructure investments and manages 45 billion euros; and DWS in the Americas, with about 42 billion euros.
Deutsche Bank’s entire asset-management unit, including the DWS businesses to be retained, reported full-year pretax profit of 446 million euros, up 67 percent from 2010, the lender said this month. Kevin Parker, head of asset management, cut costs and headcount by about a third from 2007 to 2010, while exiting businesses not deemed strategically relevant, to lift profit.
The German lender needed to raise 3.2 billion euros after Europe’s top regulator asked the region’s banks to bolster their capital buffers by mid-2012 amid the sovereign debt crisis. Chief Executive Officer Josef Ackermann said earlier this month that the bank was ahead of schedule to meet the European Banking Authority’s requirements and had surpassed the amount of capital it needed.
Ackermann, who’s leaving in May, built up the asset management and consumer banking units to temper the company’s reliance on investment banking. Among the assets for sale are the U.S. portion of DWS, formed in part from the acquisition of the Scudder funds from Zurich Financial Services AG (ZURN) in 2002.
“Asset management in the U.S. had been making some progress after a difficult period, but I don’t think Deutsche Bank believed that in the medium-term it would provide the returns it wanted,” Czepliewicz said. “So strategically it probably makes sense.”