This piece was written before the banks came public on what had been one of the worst-kept secrets in finance, that yes they were moving toward a deal. A merger had been seen as the end game for at least two years and Cerberus' part in any tie-up was pretty much assumed in November 2017 when they announce they were buying a stake in Deutshe Bank as a complement to the 5% position in Commerzbank they bought in July, '17.
That said, this is a good backgrounder.
From Pitchbook:
March 13, 2019
Deutsche Bank, plagued
by years of losses, boardroom battles and a money-laundering probe, is
said to have begun tentative merger talks with its smaller peer Commerzbank.
The discussions are believed to be at a very early stage, but reports
that Olaf Scholz, Germany's business-friendly finance minister, appears
to be supportive of a tie-up have fueled speculation that a deal—rumored
for years—may materialize.
A German national champion
Combining the two lenders would create one of Europe's largest banks
with assets close to €2 trillion, and it would also be a big step toward
creating a national champion that could rival its much larger US peers.
Scholz also is said to believe that the merged entity would go a long
way in serving investors and corporates who are wary of the hegemony of
the American capital markets in light of increasing economic
nationalism.
But a merger of this magnitude would be a huge undertaking. Deutsche, in
particular, has a dismal history of acquiring and integrating rivals,
perhaps best demonstrated by the on-again, off-again integration of
Postbank,
which it acquired at the height of the financial crisis in 2008. Adding
to this is the fact that the various stakeholders—the German
government, which holds around 15% of Commerzbank; the lenders' boards;
common shareholders; and PE powerhouse Cerberus—are not all singing the
same tune. German labor union Verdi expressed its opposition to the deal
earlier this week, claiming that the combined group would not be a
"national champion" but rather a potential target for a hostile foreign
takeover, and that the deal would also put at least 10,000 jobs at risk.
A very special shareholder
US private equity powerhouse
Cerberus,
which holds 3% of Deutsche's shares and more than 5% of Commerzbank,
previously opposed a merger, questioning the economic sense of combining
two struggling lenders. But, this view is not set in stone. German
media reports suggest that Matthew Zames (pictured), who is spearheading
the investor's efforts, is reviewing the firm's stance and could end up
as kingmaker.
Cerberus acquired shares in both lenders in 2017, reportedly investing
around €1.7 billion. The decline in each bank's shares since—DB has
fallen around 50%, while Commerzbank has lost close to 40% since—is
understood to have brought about a change of heart as the US firm seeks
to recoup some of that money....
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