BERLIN — Deutsche Bank confirmed Monday that it is in the "advanced stages" of negotiating a nearly $9-billion takeover of Bankers Trust Corp. of New York, a move many analysts see as helping the big German bank compete for a larger piece of Europe's burgeoning merger activity.
The combined company, which would have assets of about $850 billion, would jump to the top of the list of the world's biggest banks in terms of assets. The newly merged UBS would rank second, with about $778 billion in assets.
Bankers Trust shares soared $7 to $84.25 on the New York Stock Exchange, still well below the $93-per-share offer confirmed
by Deutsche Bank. The German giant's shares ended up 2.4% on Monday in European trading, which was completed before the rumored talks were confirmed.
While some banking analysts balked at the $93-per-share price--about $9.2 billion in cash--for the troubled, eighth-largest U.S. bank, most see the acquisition of Bankers Trust as offering it much needed expertise in investment banking.
Major companies in Europe are restructuring operations by selling divisions and seeking mergers with firms in other countries.
Last week, Daimler-Benz and Chrysler merged to create the world's third-largest auto maker, DaimlerChrysler. And German media giant Bertelsmann grabbed up Random House earlier this year with an eye on the crucial U.S. markets for publishing and music.
Such corporate efforts require the services of investment banks, institutions able to arrange financing in stock markets around the world. U.S. companies, such as Merrill Lynch, Goldman Sachs and Morgan Stanley Dean Witter dominate that field. The recent formation of Citigroup, through the merger of Citicorp and Travelers, the insurance and investment banking firm, was aimed at creating a global powerhouse for such business.
But Deutsche Bank, though one of the world's largest banks at $680 billion in assets, lacked such expertise--as do most European institutions. This placed Deutsche at a particular disadvantage as merger activity among European companies is due to accelerate with the introduction in January of a single currency, the euro, in 11 countries.
A merger with Bankers Trust would make Deutsche Bank the world's largest financial services concern with an estimated $850 billion in assets. And there is another big attraction in Bankers Trust's experience in management of $2.3 trillion in pension fund and mutual fund investments.
Such investment expertise will become increasingly important as European countries and companies turn to stock market investing to earn returns on retirement savings. Governments have been the sole source of pensions in many European countries, but the burden of taxes and pension benefit outlays is forcing them to turn to U.S.-style pension investment accounts.
"One thing you can say for sure is that asset [investment] management is a tremendous growth potential and Deutsche Bank and Bankers Trust together would be one of the top asset managers in the world," said Dennis M. Phillips, an analyst at Commerzbank.
Bankers Trust was probably not Deutsche Bank's first choice as a merger partner, said Dieter Hein, banking analyst at Frankfurt's Commerzbank. But the German bank likely concluded "it's better to do something with a second-tier player than to do nothing at all," Hein added. Deutsche had earlier been eyeing Merrill Lynch, Morgan Stanley and Goldman Sachs, Hein said, but none of those investment banking firms wanted to be acquired.
Economists at leading German economic research and forecasting institutions note that the impending takeover, which Deutsche Bank casts as a "cash merger combination," better protects both banks from financial unsteadiness in Russia, Asia and Latin America.
"This can be seen as positive for both banks in the sense that risks are being divided and distributed among more shoulders, and with risks, the more shoulders carrying them, the better," said Stefan Comes, an economist with the Research Institute of the German Foreign Policy Society in Bonn.
It also establishes a benchmark for European competitors who will have to make similar acquisitions if they want to compete with Deutsche Bank in the European Union's single-currency trade bloc, said Hans Bueschgen, a professor at Cologne University's Institute of Banking.
Most German analysts agree with Wolfram Schrettl, chief of international economics at the German Institute for Economic Research in Berlin.
"The fundamental logic driving this deal is that American banks are seeking positions in the euro [single-currency] market and European banks need positions in the United States because that is the dominant market. It's quite a reasonable step for both and I imagine there will be others like it," Schrettl said.
Indeed, U.S. companies made more acquisitions in Germany last year than Germans made in the United States.
Terms of the proposed takeover are to be voted on by both banks' boards of directors Sunday, Deutsche Bank said in its statement late Monday.
"The proposed combination of Deutsche Bank and Bankers Trust would create a truly compelling global financial services company," Deutsche Bank Chairman Rolf Breuer said. "We are working diligently to finalize all terms in preparation for the Sunday meeting."
Times staff writer James Flanigan in Los Angeles contributed to this report.