Deceived BayernLB Would Still Have Done Hypo Deal: Court

Bayerische Landesbank failed to convince Vienna’s commercial court that it was duped into buying more than half of Austria’s Hypo Alpe-Adria-Bank International AG in a deal that caused billions of euros of losses.

Even though BayernLB was deceived by one of Hypo Alpe’s shareholders, it was so keen to do the deal that it wouldn’t have walked away from the 1.625 billion-euro ($2 billion) purchase or demanded a lower price had it known about the deception, Judge Charlotte Schillhammer said in a Dec. 12 ruling published today.

“The plaintiff would have signed the contract with the defendant without a discount even if it had been told about the deception,” according to a court statement. After BayernLB decided to pursue growth in eastern Europe, Hypo Alpe “was the only acquisition target that met its criteria, which is why the plaintiff was ready to condone quite a lot.”

BayernLB, which eventually lost 3.75 billion euros with the Hypo Alpe investment, will appeal the ruling, a spokesman said. BayernLB is ensnared in a web of legal battles five years after it walked away from Hypo Alpe and Austria nationalized the bank.

Hypo Alpe’s workers’ trust, MAPS, misled BayernLB by overstating Hypo Alpe’s capital level in 2007, the court found after hearing 85 witnesses and considering 17,000 pages of evidence. The other shareholders were the Carinthia province, a group of investors led by Tilo Berlin and insurer Grazer Wechselseitige.

Preference Shares

The bank’s capital had been inflated through shares that were later found ineligible as bank capital. Some shares had been bought with loans from Hypo Alpe itself, others allowed the holders to sell the shares back to Hypo Alpe. Former Chief Executive Officer Wolfgang Kulterer, who was also MAPS’s chairman, is in jail for those deals.

Even so, BayernLB, fresh from losing a takeover battle for Austria’s Bawag PSK Bank AG to Cerberus Capital Management LLP in 2006, would have been ready to look the other way, as it already knew about Hypo Alpe’s weak capital base, the court said.

Austria is weighing a similar lawsuit against BayernLB by the end of the year, saying it was deceived about Hypo Alpe’s true state when it agreed to rescue the bank.

The case is 20 Cg 41/11z at the Vienna Commercial Court.

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