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Branches of UBS, Deutsche Bank to merge?

Branches of UBS, Deutsche Bank to merge?

30 April 2019

There are said to be ongoing negotiations for the asset management businesses of UBS and Deutsche Bank to merge in a deal that would create a new leader of the European investment industry. The Swiss giant and German bank are reportedly in serious talks.

Ongoing negotiations

According to those close to both financial gigantic institutions, talks have been talking place for months now and are very serious. No wonder, as the deal itself would be quite big. Connecting asset management arms of the Swiss UBS and German Deutsche Bank would create one of the biggest investment company in the European financial, fintech market. Such entity would get ahead of competitors like Axa from France, Legal & General from the UK and its main rival would be French Amundi, which is currently the biggest manager of money on the continent. Amundi holds under management 1.4 trillion euros. The UBS/Deutsche Bank combo would be in the better position to compete with BlackRock or Vanguard which controls assets of 11.7 trillion dollars. UBS used to be the largest asset manager worldwide 12 years ago, but the financial crisis took it off the first spot. Last year UBS was at 16th spot in the ranking provided by Willis Towers Watson. In 2019 experts foresee a hike in deals activities in this market as big players will try to win inflows of clients and marginalize smaller companies.  

Restructuring?

How the potential deal would look like? There is reportedly considered a structure in which UBS would merge its asset management unit that has under management 700 billion euros into the Deutsche’s DWS. In exchange the Swiss company would receive shares in the group. At this moment DWS is owned in 79 percent by Deutsche Bank and oversees 662 billion of euros in assets. After the transaction, the German Bank would still be the controlling shareholder of the branch, but the interest will be lower. DWS is listed as KGaA, which means a partnership limited by shares. Last year Deutsche Bank listed the minority stake on Frankfurt stock exchange. Rate of growth of business was set high – with goal of 3-5 percent in increasing assets under management, but couple of months after listing this ambitious target was ditched. Instead of growth, DWS saw its assets melt by 5.4 percent in 2018. The structure of business means that the Deutsche Bank can still have voting rights even as long as it has at least 40 percent of stake. Currently, replacing DWS’s executive board by Deutsche Bank can be one without asking other shareholders.

How close is the deal?

Though the ongoing negotiations are taking place for months, it is difficult to say how close is to announcing the deal. It is not guaranteed or imminent at this moment. Also, it is known that other companies are after DWS – like Allianz, the biggest insurance group of Germany. Allianz is looking at potential opportunity to bid for the business. Also Amundi might shown interest, as it is now close to acquiring Italy’s Pioneer for 3.5 billion euros. Other potential investors for DWS named by people close to situation are Generali and Natixi Investment Managers. UBS itself is considering many options for acquisition of DWS, as Bloomberg got to know. Fresh after rumors of talks of merger with UBS, DWS shares went up 35 percent since beginning of the year. Shares cost now around 31.78 euros, whereas the market value is at 6.42 billion euros.

ExchangeMarket.ch
ExchangeMarket.ch