Dresdner to pay $190m to 'handcuff' Wasserstein staff

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The Independent Online

Dresdner Bank is to set aside $190m (£135m) to fund golden handcuffs in an attempt to stop staff at Wasserstein Perella, the American investment banking boutique, walking out of the door following its agreement to pay $1.37bn in stock to buy the firm.

Dresdner Bank is to set aside $190m (£135m) to fund golden handcuffs in an attempt to stop staff at Wasserstein Perella, the American investment banking boutique, walking out of the door following its agreement to pay $1.37bn in stock to buy the firm.

The deal, announced yesterday, will allow Dresdner to fulfil a long-standing ambition to break into Wall Street. It will also mean that each of Wasserstein's top 300 employees will receive a payment averaging $600,000, but staff will have to stay at the bank for up to four years to collect.

Germany's third-biggest bank has already paid out 440m euros (£270m) in retention bonuses this summer to keep its own staff sweet in the wake of the collapse of plans this spring to merge with larger rival Deutsche. Those payments have not stopped 200 staff quitting.

Analysts said the acquisition plugs an important strategic hole - but at a price. Wasserstein has been riding high on the back of its role in the Time Warner and AOL merger and is expected to make pre-tax profits of $75m this year. Jim Hyde, an analyst at Fox Pitt Kelton, said: "It is a necessary but expensive piece in the scaffolding needed to stop the house falling down."

Following the Wasserstein deal, Dresdner will rename its investment banking operations Dresdner Kleinwort Wasserstein. Bruce Wasserstein, 52, who founded the Wall Street operation 12 years ago, will be executive chairman of the combined entity, while Dresdner's Leonhard Fischer will be chief executive officer. Tim Shacklock, the most senior Briton at Dresdner Kleinwort Benson will be deputy chairman and co-head of investment banking with Wasserstein's Mike Biondi.

Dresdner is to fund the deal with the issue of 30.5 million new shares. The bank said the deal would lead to a "mild dilution" in earnings this year. Bernd Fahrholz, Dresdner's new chief executive has given a commitment that the operation will function as a separate entity.

Dresdner is just the latest in a string of European banks to buy in the US over recent months. A fortnight ago, Credit Suisse First Boston bought Donaldson Lufkin Jenrette for $13bn while UBS paid $15.4bn for Paine Webber two months ago.

Deutsche is still on the prowl in the US despite having spent $10bn to buy Bankers Trust last year. The German bank has made numerous approaches to JP Morgan which went to Chase last week in a $36bn deal.

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