Is This $8.91B Asset Management Deal Back On the Table?
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Friday, October 07, 2016

Is This $8.91B Asset Management Deal Back On the Table?

It looks like UniCredit isn't the only European banking titan looking to raise some money by divesting from its multinational asset management arm.

John Cryan
Deutsche Bank
Chief Executive Officer
Deutsche Bank is working on an IPO of Deutsche Asset Management [profile], the FT's Martin Arnold, Arash Massoudi, and James Shotter report, and per unnamed analysts the FT estimates that the asset manager could be worth 8 billion euros (about $8.91 billion). Meanwhile, the bidding continues in UniCredit's possible sale of Pioneer Investments [profile], with Reuters reporting that, per Italian newspaper Il Messaggero, Amundi is now bidding 4 billion euros (about $4.46 billion). [See MFWire's living timeline of the Pioneer auction for more details and history.]

CNBC, MarketWatch, and TheStreet all picked up on the FT report.

The Deutsche AM IPO idea, would be to help the giant German bank "rebuild its capital buffers," after working out some kind of giant settlement with the U.S. Department of Justice over selling mortgage-backed securities in the lead-up to the financial crisis eight years ago. (Last week Allianz guru and ex-Pimco chief Mohamed El-Erian told CNBC that the Deutsche situation is not a "Lehman moment.")

The IPO rumor comes a week after Nicholas Moreau took over Deutsche AM and less than a month after Deutsche Bank CEO John Cryan sent an open letter to his employees shooting down rumors about a Deutsche AM spinoff.

"There is one rumor in particular that I would like to dispel by making it unambiguously clear that Deutsche Asset Management is, and will remain, an essential part of our business model," Cryan wrote in the September 12 letter.

(Four years ago Deutsche did a strategic review of Deutsche AM but decided not to sell.)

Deutsche AM had 719 billion euros (about $800.73 billion) as of June 2016, including about 216 billion euros (about $240.59 billion) in AUM here in the Americas. That $800.73 billion in AUM translates analysts' $8.91-billion Deutsche AM price tag estimate into 1.11 percent of AUM.

Meanwhile, as far as UniCredit's Pioneer sale goes, Amundi's rumored $4.46-billion bid is a solid 33 percent higher than the previously reported price estimate of 3 billion euros (about $3.34 billion). At least eight other bidders have been in the press so far, though Reuters previously reported that, per unnamed sources, Italian banking giant UniCredit might not pick the winning Pioneer bidder until after the controversial Italian constitutional reform referendum vote on December 4, nine days before UniCredit CEO Jean Pierre Mustier is expected to reveal his Pioneer decision as part of his strategic review results presentation at a planned UniCredit investor day in London.

Amundi's bid means that UniCredit is currently getting solidly better pricing on Pioneer than analysts expect Deutsche Bank to get on Deutsche AM, at least when looking at price-to-AUM ratios. $4.46 billion for Pioneer, which had $245 billion in AUM as of June, translates into 1.82 percent of AUM, compared to the 1.11 percent of AUM ratio for the $8.91 billion valuation for Deutsche AM. Given El-Erian's comments about what Bloomberg is calling "Deutsche Bank's $14 Billion Scare," the Deutsche AM divestment looks like a distressed sale.

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