Deutsche Bank, UBS asset management deal talks stall over majority control issue

Bloomberg

Deutsche Bank AG and UBS Group AG’s talks on combining their asset management businesses to create a European powerhouse have stalled, according to people familiar with the matter.
A deal is now seen as increasingly unlikely after disagreements emerged over who would retain majority control of the combined entity, the people said, asking not to be identified as the matter is private. Deutsche Bank also delayed a decision on DWS because it preferred to keep options open for longer, the people said. No final decision has been made and a deal could still be salvaged, the people said.
A combination of UBS asset management, which oversees about 722 billion euros ($812 billion), and DWS, which manages 704 billion euros, would have vaulted the combination to the size of top competitor Amundi SA and allow it to better compete with American giants like BlackRock Inc. The two businesses are seeking to gain scale and save costs in an industry where margins are under pressure from an investor flight to cheaper, passive funds.
DWS Chief Executive Officer Asoka Woehrmann has been focussing on cost cuts since he was appointed to the role last October while seeking to stem client money outflows. Woehrmann is currently working on a strategic review of the business and plans to present the results during the second quarter, people familiar with the matter have said.
DWS extended losses after the news, declining as much as 5 percent and trading 3 percent lower at 30.30 euros as of 4:43 p.m in Frankfurt.
DWS has held preliminary talks on teaming up with firms including Axa SA and Amundi as it looks for ways to boost its size, people familiar with the matter had said previously, though a deal with UBS was seen as the preferred option. Finding an agreement had been difficult because Deutsche Bank wasn’t willing to give up control, the people said.
One of the core challenges Deutsche Bank Chief Executive Officer Christian Sewing is facing is to reverse the lender’s long revenue decline. Losing control of DWS would remove almost 2.2 billion euros of
revenue, or 8.6 percent of Deutsche Bank’s total top line.
UBS has also been evaluating options for its asset management unit, including a partial sale or merger of the business, people with knowledge of the matter have said. The company has been assessing the market for at least a year as dealmaking picks up across the industry, according to the people.
Deutsche Bank last month abandoned talks to acquire Commerzbank, raising questions about the bank’s future strategy as it seeks to stem a decline in revenue.