Deutsche Bank unit IPO imminent

Bloomberg

The clock is ticking for John Cryan to complete the next step in Deutsche Bank AG’s turnaround. The lender on Monday said it will sell shares in its DWS asset management business “in the earliest available window,” confirming a plan first outlined a year ago and kicking off what is usually a four-week run-up to the initial public offering. Deutsche Bank didn’t indicate how much it plans to raise, though people familiar with the plan previously said the lender expects to sell a 25 percent stake for about 2 billion euros ($2.5 billion).
A successful offering would mark an important achievement for Deutsche Bank CEO Cryan, who proposed the IPO in March last year to help bolster capital amid investor concerns about the lender’s financial strength. It would also give the business more independence and flexibility for acquisitions at a time when firms are under pressure to consolidate amid an investor flight to cheaper passive funds.
“While Deutsche Bank is selling part of its crown jewels, the flotation also gives greater flexibility to DWS and could be positive for the unit,” said Philipp Haessler, an analyst with Equinet Bank AG in Frankfurt.
DWS joins firms such as Amundi SA, the asset manager controlled by Credit Agricole SA, in going public as margins in the industry decline. Since its initial offering in 2015, Amundi has become Europe’s largest asset manager with 1.4 trillion euros under management, helped by acquisitions. DWS is about half that size. Deutsche Bank tried to sell much of the unit in 2012, but stopped when it couldn’t get enough money.
Shares of Deutsche Bank rose 1 percent to 13.42 euros by 9:50 a.m. in Frankfurt. The stock is the worst performer this year among the 43 members in the Bloomberg Europe 500 Banks and Financial Services Index, with a decline of 15 percent.
It’s “too early to say whether we’ll have anchor investors,” Nicolas Moreau, who runs the business, said in an interview. “But if there’s an investor who brings us strategic advantages such as exposure to countries or clients where we’d like to grow, then that’s something that could be good.” DWS is targeting net inflows of 3 percent to 5 percent of assets a year, an adjusted cost-to-income ratio of less than 65 percent, and plans to pay out between 65 percent and 75 percent of net income in dividend. While the unit won’t get any proceeds, it has excess capital that it can use for growth or to return to shareholders, Moreau said. Cryan said in November that he aims to complete the offering by the end of the first quarter, but a recent spike in market volatility stoked broader stoked concerns that IPOs and other investment banking activities may get delayed.
Although the formal announcement of an IPO intention does not impose any legal requirements, it typically ushers in a two-week period in which a company holds talks with potential investors to settle on a price range for its shares. In the following two weeks, the company usually takes orders from investors in what is called the book building.