Commerzbank to buy Dresdner in $15 bln deal

Commerzbank said it would first buy just over 60 percent of Dresdner and the rest later in a takeover that is set to result in closure of more than a third of the combined group's roughly 1,900 bank branches and cost 9,000 jobs.

The deal puts a price tag of 9.8 billion euros ($14.5 billion) on the bank, more than 14 billion euros less than Allianz paid for it seven years ago. It nevertheless creates a group to rival flagship lender Deutsche Bank in Europe's biggest economy.

But it casts a pall of uncertainty over the future of Dresdner Kleinwort, the group's accident-prone investment bank, which led the group to make about $5 billion of writedowns from investments that exploded during the credit crunch.

People close to the banks have also criticised any deal which will see insurer Allianz end up with a stake of almost 30 percent in the new Commerzbank.

Allianz and Commerzbank are also pooling 1.25 billion euros to cover further losses, with Allianz, Europe's biggest insurer, taking on up to 975 million euros of that.

The deal should deliver 5 billion euros a year of synergies, Commerzbank said.

A further strand to the deal sees the insurer buying Commerzbank's fund management business Cominvest.

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 unsuccessfully tried to match investment bankers with insurance salesmen.

Architects of Allianz's 24 billion euro Dresdner takeover seven years ago had hoped to sell bank accounts to Allianz customers as well as products such as car insurance at bank branches.

Instead, investor tempers rose as 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."

BEEF UP

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.