Deutsche Bank yesterday saw its shares leap almost 6 per cent, as it confirmed it was in merger talks with Bankers Trust (BT), the United States' eighth-largest bank holding company. Amid intensifying speculation over the deal, BT released a statement saying Deutsche was offering US$93 for each BT share, or $9.2 billion for the company. BT said both management boards had reviewed and indicated support for the deal, but were awaiting final approval from their supervisory boards, which were due to meet separately on Sunday. Deutsche Bank chairman Rolf-Ernst Breuer said: 'The proposed combinations of Deutsche Bank and Bankers Trust would create a truly compelling global financial services company.' 'We have scheduled high-level meetings with regulators in New York and Washington this week to describe our proposed transaction. I remain optimistic that all final details will be resolved satisfactorily.' Both banks cautioned that the deal was still subject to board approval and regulatory agreement, and that although they had both completed 'in all substantial respects' due diligence investigations, there were still final structural, legal and tax aspects of the transaction that needed to be ironed out. Deutsche Bank's shares were quoted at the close of Frankfurt trading yesterday at 5.1 deutschemarks (about HK$23.32) at 112.6 marks. But some analysts said Deutsche's bid for Bankers Trust looked costly, particularly given the bank had made a $488 million third-quarter loss. 'It's rather expensive,' said James Hyde, European banks analyst at Merrill Lynch. When rumours of the deal first surfaced earlier this year, Deutsche had been expected to pay $5.5 billion, he said. Such a large increase was questionable and could put Deutsche Bank well below the assets-to-liability ratio of 8 per cent required by the Bank for International Settlements. He estimated that it could also represent an earnings dilution of up to 14 per cent but conceded that it improved Deutsche's position in the coveted US investment banking market. He said the move also increased Deutsche Bank's exposure to the junk-bond sector in the US, which could prove useful with the onset of the euro and the expectation of an increased emphasis on capital-market fund-raising by below investment-grade firms. Furthermore, the acquisition of Bankers Trust would extend Deutsche's position in the European equities market, following Bankers Trust's purchase last year of NatWest Markets' pan-European equities business. It would also substantially boost Deutsche's funds under management, putting it in fourth place worldwide and second in terms of institutional funds under management. 'All these things are fine, but the management ability of Deutsche Bank in these kinds of businesses has been rather suspect,' Mr Hyde said.
