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Allianz Fund Unit Criticizes Banks for Share Sales

A logo for Allianz SE, Europe's biggest insurer sits covered in snow outside of a branch in the town of Davos, Switzerland. Photographer: Bryn Colton/Bloomberg
A logo for Allianz SE, Europe's biggest insurer sits covered in snow outside of a branch in the town of Davos, Switzerland. Photographer: Bryn Colton/Bloomberg

April 3 (Bloomberg) -- Allianz Global Investors, the fund management unit of Europe’s largest insurer Allianz SE, criticized investment banks for share sales it deemed “mishandled” and threatened to stop participating in so-called block sales, according to a letter obtained by Bloomberg News.

“I am writing to express our growing frustration and investment anger at the way in which many equity placings are being handled, or more directly, mishandled,” Neil Dwane, chief investment officer for Europe, said in the letter, which was sent to brokers yesterday. “We have tolerated as much as we can.”

The complaint comes as banks have been left holding stakes in companies after failing to find buyers, which can weigh on share prices and cause investors losses. In March, Barclays Plc disclosed it was stuck with a 697 million-euro ($894 million) stake in Dutch cable television operator Ziggo NV after managing a share sale for owners Warburg Pincus LLC and Cinven Ltd. Ziggo shares fell to the lowest in more than a month after Bloomberg News reported the failure to find enough buyers.

“AllianzGI has a constructive and active engagement with its brokers on behalf of the clients we serve,” said spokesman John Wallace. “As a matter of policy, though, we do not comment on private correspondence.”

‘Excessive Competition’

Companies in Europe, the Middle East and Africa have raised $24.2 billion in additional share sales including block deals this year, nearly 40 percent more than they sold in the same period in 2012, according to data compiled by Bloomberg. UBS AG, Goldman Sachs Group Inc., Deutsche Bank AG, Bank of America Corp. and Morgan Stanley are the top five ranked share-sale managers for such transactions, the data show.

Dwane cited “excessive competition” among banks to win mandates and league-table credit on block sales as well as “lack of communication”; for example, brokers failing to communicate to clients and investors that they were only able to sell some of the shares.

“Therefore we will take serious trading suspension action in the future if these transactions do not fulfill our requirements,” Dwane said in the letter. “Many of my investors have been disappointed with these transactions and are increasingly annoyed with the behavior of the broking community in general.”

Contested Auctions

Investment banks typically bid to manage share sales in tightly contested auctions, where the bank that bids the narrowest discount to do the deal usually leads the sale. Narrowing the discount to shares’ market price increases the funds to be raised by the company, even as it makes the sale harder to complete.

In November, HSBC Holdings Plc disclosed a stake worth 400 million euros of Amadeus IT Holding SA shares after failing to find buyers for shares in the travel reservations company.

This isn’t the first time that investors have complained about the way banks handle share sales. Bank of America, the second-largest U.S. lender, in 2011 urged a review of how companies, their advisers and underwriters manage initial public offerings in Europe amid “widespread dissatisfaction” from clients.

That same year, BlackRock Inc. portfolio managers Luke Chappell and James Macpherson wrote a letter to U.K. bankers criticizing “unrealistic” initial stock-sale values, Sky News reported on its website.

To contact the reporters on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net; Aaron Kirchfeld in London at akirchfeld@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net; Jacqueline Simmons at jackiem@bloomberg.net

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