Kleinwort agrees pounds 1bn Dresdner offer

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The Independent Online
Kleinwort Benson yesterday accepted a pounds 1bn takeover offer from Dresdner Bank, Germany's second-largest, in a deal offering maximum autonomy to the British merchant bank.

To be known as Kleinwort Benson, member of the Dresdner Bank group, the British house would become the City-based vehicle for the German giant's global investment banking ambitions.

Describing the two banks as a perfect fit with minimal overlap, Jurgen Sarrazin, chairman of Dresdner, said there would be no job losses at Kleinwort and no management shake-up in a deal he stressed had nothing in common with the recent distress sales of Barings and SG Warburg to Continental banks.

"It is expected that employees, and especially senior management, remain committed to Kleinwort Benson. To all intents and purposes, the Kleinwort management will continue to develop the business autonomously," Mr Sarrazin said.

Simon Robertson is the chairman-designate of what will become Dresdner's group investment banking arm. Lord Rockley, Kleinwort's current chairman, is to retire.

Dresdner, with shareholder equity of pounds 6.1bn, is to pay for the deal out of its own resources, and will immediately write off pounds 500m of goodwill against reserves. Hansgeorg Hofmann, a board member of Dresdner with strong experience of US investment banking, would become deputy chairman and executive director of Kleinwort Benson.

"We are now seeing a new Dresdner Bank. Everything we do in the future with regard to investment banking will be done with Kleinwort Benson," he said. Mr Sarrazin, Gerhard Eberstadt and Horst Muller will also join the Kleinwort board. There will be no Kleinwort member on Dresdner's executive board in Frankfurt.

Mr Sarrazin revealed a bold vision of Dresdner, with Kleinwort building up global investment banking prowess to rival the giants on Wall Street and the main European competitors, including Deutsche Bank/Morgan Grenfell.

He dropped broad hints of bolstering the investment banking presence in the US and Japan as the next steps. "The Dresdner Bank group aims to offer an integrated presence in all the major centres in the three time zones, offering the range of services from one source," Mr Sarrazin said.

"Kleinwort Benson's excellent reputation internationally, its high degree of professionalism and its proven expertise will provide a significant addition to the Dresdner Bank group," he added.

The group signalled its intention to acquire further asset management businesses. It also wants to increase M&A activity out of Germany and build up the international bond side.

Shareholders were given an added impetus to accept the offer by the warning that Kleinwort Benson's treasury division had incurred undisclosed losses in the US mortgage-backed debt market. Although the losses were not expected to recur, the news could have a depressing effect on the share price, which yesterday rose 7p to 710p to reflect the 725p per share offer.

Tony Cummings, financial analyst at SG Warburg, said: "It is very surprising - I will certainly be knocking 5-10 per cent off my profits forecast.

"The terms of the price, which seems to value the fund management business at 15 times earnings and the investment bank business at 1.5 times book value, is well within prices paid for other financial institutions."

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