The FINANCIAL — The Management Board and the Supervisory Board of Deutsche Bank AG (XETRA: DBKGn.DE / NYSE: DB) on September 12 resolved to submit a voluntary public takeover offer to the shareholders of Deutsche Postbank AG to acquire their no-par value registered shares.
Deutsche Bank intends to offer Postbank’s shareholders a cash payment equal to the volume-weighted average share price of the Postbank share based on the quotations on the German stock exchanges for this share over the last three months. This price is expected to be in the range of € 24 to € 25 per share. The final minimum price will be set in approximately one week by Germany’s Federal Financial Supervisory Authority (BaFin).
The exact period for the acceptance of the takeover offer will also be published in this document. Deutsche Bank currently holds 29.95 percent of the shares of Deutsche Postbank AG.
The Management Board and the Supervisory Board of Deutsche Bank AG also resolved to implement a capital increase from authorized capital against cash contributions. The gross proceeds from the issue are expected to be at least € 9.8 billion. The capital increase is primarily intended to cover capital consumption from the planned Postbank consolidation, but will also support the existing capital base to accommodate regulatory changes and business growth.
Josef Ackermann, Chairman of the Management Board and the Group Executive Committee of Deutsche Bank, said: “Through this capital increase, Deutsche Bank intends to secure the equity capital required for a planned consolidation of Postbank. As a result, we can expand our strong position in our home market, take a leading position in the European retail banking business and significantly enhance Deutsche Bank’s revenue mix. Furthermore, with this capital increase we are strengthening the bank’s equity capital in light of expected regulatory changes. The takeover offer to the shareholders of Postbank allows us to minimize the total costs of the acquisition.”
Capital increase with subscription rights with a volume of at least € 9.8 billion
Deutsche Bank expects to issue a total of 308.6 million new registered no par value shares (common shares) in public offerings in Germany and the United States using authorized capital. The share capital of Deutsche Bank AG will be increased by € 790.1 million, from € 1,589.4 million to € 2,379.5 million, corresponding to a volume of 49.7 per cent of the current share capital.
Deutsche Bank’s shareholders will be entitled to statutory subscription rights. If the available authorized capital is issued in full, shareholders will be able to purchase one new share for every two shares they own (2 : 1 subscription ratio) through so-called indirect subscription rights. In order to implement this subscription ratio, Deutsche Bank AG plans to reduce the number of shares that carry subscription rights. For this purpose the Bank intends to buy back up to 3.1 million shares in the market from September 13, 2010, through September 16, 2010. These purchases will be carried out on the basis of the authorization resolved upon by the Annual General Meeting of Deutsche Bank. The shares so repurchased will later be used for allocations under future share-based compensations plans to employees of Deutsche Bank or its subsidiaries. To achieve an even subscription ratio, the subscription rights for any fractional amounts resulting from the repurchase will be excluded.
The resolution on the implementation of the capital increase and the determination of additional terms, including the final volume and subscription ratio, is expected to be taken on September 20, 2010, by the Management Board with the consent of the Chairman’s Committee of the Supervisory Board.
The planned capital increase will be led by Deutsche Bank as global coordinator and bookrunner. A syndicate of banks comprised of UBS Investment Bank, Banco Santander, BofA Merrill Lynch, COMMERZBANK, HSBC Trinkaus, ING, Morgan Stanley and Société Générale Corporate & Investment Banking as joint bookrunners as well as additional syndicate members have agreed to a firm underwriting of the new shares at the preliminary subscription price of € 31.80 and under conditions customary in the market. This ensures gross proceeds from the issue of at least € 9.8 billion. The final subscription price will be determined and announced on September 20, 2010 and will depend on further market developments.
Subject to the approval by the Federal Financial Supervisory Authority (BaFin), a securities prospectus is expected to be published on September 21, 2010, and will subsequently be available from Deutsche Bank AG. The Bank intends to file a prospectus supplement relating to the subscription offer with the Securities and Exchange Commission (SEC) on this date as well. These will permit shareholders to exercise their subscription rights during the period from September 22 up to and including October 5, 2010. It is intended to provide for trading in the subscription rights on the German stock exchanges from September 22, 2010 through October 1, 2010, and the rights are expected to be admitted to trading on the New York Stock Exchange form September 22, 2010 through September 29, 2010. Delivery and settlement of the new shares subscribed within the framework of the subscription rights offering is expected to take place on October 6, 2010.
Revaluation of current Postbank investment expected
Based on the takeover offer, Deutsche Bank intends to fully consolidate the Postbank Group already in 2010 if the capital increase is successfully implemented. As a result of this intention, in accordance with the revisions of IFRS 3 (“Business Combinations”), in effect since January 1, 2010, the current investments in Postbank will need to be revalued. Accordingly, before the date of Postbank’s initial consolidation, Deutsche Bank must determine the value in use of its currently existing Postbank shareholding and mandatorily exchangeable bond on the basis of their expected disposal value and thus their current fair value. Deutsche Bank will therefore recognize a prospective charge of around € 2.4 billion in the third quarter of 2010 based on book values as of June 30, 2010 and an assumed fair value of the Postbank share at the date of initial consolidation in the range of € 24 to € 25 per share.
