German bank giant to cut 9,000 jobs
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Commerzbank's plans to buy the Dresdner Bank for 9.8 billion euros will result in Germany's second largest banking group. The takeover will involve the elimination of 9,000 jobs in order to save 2 billion euros in costs.
Commerzbank aims to cut almost 2 billion euros ($2.95 billion) in costs by slashing 9,000 jobs and paring laggardinvestment bank Dresdner Kleinwort after swooping in to buy Dresdner Bank, it said on Monday.
Commerzbank will buy its competitor from Allianz for $14.5 billion in two steps, taking 60 percent this year and the rest in 2009 to create a rival to flagship Deutsche Bank in Europe's biggest economy.
Much of the purchase price will be paid to Allianz in the form of shares, leaving Europe's biggest insurer with a stake of almost 30 percent in the new Commerzbank.
The deal puts a price tag of 9.8 billion euros on Dresdner -- a fraction of the 24 billion euros Allianz paid for it near the height of the dot-com bubble in 2001.
On Monday, the new owner outlined a blueprint to cut costs, with more than half the savings to come from Dresdner Kleinwort, the straggling investment bank which has been further hobbled by the credit crunch.
But analysts and insiders were sceptical over whether the pairing of what many see as two mediocre performers could create a financial champion.
"It is good for Allianz. In the seven years they have owned Dresdner they have learned that they don't have a clue about running a bank," said Dirk Becker, an analyst with Landsbanki Kepler.
"But it is a huge integration. We will see in half a year that something will go wrong."
DZ Bank analyst Matthias Duerr wrote: "On a first glance we don't like the transaction at all. The acquisition of Dresdner is more expensive than expected."
Shares in Commerzbank were indicated down roughly 2 percent in premarket trading while Allianz stock edged up slightly.
The sale casts a cloud over Dresdner Kleinwort, the group's accident-prone investment bank which helped cause the insurer $5 billion of writedowns during the credit crunch.
About 2,500 of the 9,000 jobs that will be cut are set to be lost outside Germany, much of those at Dresdner Kleinwort.
The sale will give Commerzbank a badly needed leg-up in its home market, which is dominated by state not-for-profit lenders, and allow Allianz to end an unhappy marriage that tried to match investment bankers with insurance salesmen.
Architects of the Dresdner takeover had hoped to sell bank accounts to Allianz customers as well as products such as car insurance at bank branches.
Instead, investor tempers rose and Dresdner racked up billions in losses.
In June last year, Reuters reported that Allianz had begun to consider its options for Dresdner. The resulting jump in the insurer's share price reflected the degree of investor frustration with the botched takeover.
But finding a buyer has not been easy, mostly because of Dresdner's laggard investment bank -- a business, said one insider, which Allianz had never intended to keep.
"It was clear from the start to Allianz that they did not want to keep the investment bank," this person said. "But when the time was right to sell it -- at the top of the investment banking boom in late 2006 -- they fell asleep at the wheel."
The sale will beef up Commerzbank. Despite being one of the country's biggest lenders, it is still a lightweight by European standards, with a market value of about 13 billion euros -- less than half that of Frankfurt neighbour Deutsche Bank.
China Development Bank had also been interested in Dresdner but was sidelined in the face of opposition in both
countries' capitals to a deal.
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