BlackRock, Soros eye Deutsche Bank unit IPO

FRANKFURT / Reuters

BlackRock, George Soros and big sovereign wealth funds are among investors expressing interest in
buying stakes in the initial public offering of Deutsche Bank’s asset management arm, a person familiar with the matter said. The sovereign funds include Singapore’s Temasek, the person said.
Deutsche Bank is finalising plans for the IPO of the asset management business, known as DWS, that have been a year in the making. Deutsche is expected to sell 25 percent of existing DWS shares for 1.5-2 billion euros ($1.9-$2.5 billion), people close to the matter have said.
DWS is seeking anchor investors, the person said, while it also wants to ensure the liquidity for the free floating shares. One of Deutsche Bank’s largest investors, the Chinese conglomerate HNA, is not expected to invest in the IPO, said the person, who disclosed the potential investor base on condition of anonymity because the IPO process is ongoing.
A Deutsche Bank spokesman declined to comment, while the potential DWS investors declined to comment or were not immediately available for comment.
The DWS listing will mark the most tangible milestone yet in
Chief Executive Officer John Cryan’s struggle to restructure the flagship
German bank.
Deutsche said in March 2017 it would list a stake in DWS as part of a broader overhaul to help the bank move on from a string of lawsuits and trading scandals.
Some investors have raised questions about the timing of the IPO as the economic growth cycle turns and financial markets become more volatile. “One of the key investor concerns regarding DWS is the question whether the asset management industry in general is at the top of the cycle,” said a second
person close to the IPO.
The asset management industry is facing pressure on fees and rising regulatory costs, which show no signs of abating and which could limit profits for the sector.
“Asset management is under pressure from regulators, investors and the public to perform better and charge less,” said Tom Brown, Global Head of Asset Management at consultants KPMG. “Firms need scale or to specialise to stay in the game.”
These potential constraints come on top of issues specific to Deutsche Bank. “Will DWS be able to cut costs as harshly as needed?” the second person close to the IPO said. “Will it be able to do an interesting large M&A deal given the fact that DB wants to retain control?”
Another concern among investors is that Deutsche Bank could dilute the price of DWS shares by selling down its stake if the bank needs
to raise capital.
The IPO would help Deutsche to bolster its balance sheet and quell shareholder unrest over the pace of its turnaround after three consecutive years of losses. It could also
possibly open the way to dividend payouts. A price range for the shares is expected to be announced as so
on as Sunday, followed by the publication of an investor prospectus
on Monday.