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. Last Updated: 07/27/2016

Deutsche, Dresdner Merger Called Off




FRANKFURT, Germany -- Dresdner Bank AG said Wednesday it has called off a planned merger, announced just a month ago, with Deutsche Bank AG that would have created the world's largest bank in terms of assets.


Dresdner's management board "unanimously decided to discontinue the merger process'' with its bigger cross-town rival "with immediate effect,'' Dresdner said in a short statement.


Dresdner said it was backing out due to conflict between the two groups over Dresdner Kleinwort Benson, its investment banking arm. Though the two banks had agreed to a "merger of equals,'' after the deal was announced Deutsche Bank proceeded to try to sell part or all of Dresdner Kleinwort Benson, Dresdner said in its statement. "In both word and spirit, Deutsche Bank rejected a balanced integration of Dresdner Kleinwort Benson,'' Dresdner said.


A Deutsche Bank spokesman said the bank also was preparing a statement.


Trading in both banks' shares were suspended in Frankfurt, as well as those of the Allianz insurance giant, a major shareholder in both banks, which had helped bring the two together.


Investors and employees have frowned on the way the merger was proceeding and have voted with their feet. Both banks' share prices have fallen in the month since they announced plans to create a $1.2 trillion banking powerhouse.


Deutsche Bank's shares have plunged 19 percent since March 8, the day before the deal was announced. Dresdner's have fallen 18 percent.


Analysts have said the banks overlap in too many areas to produce enough savings in the medium term to make the merger worthwhile. Some investors say Deutsche Bank cut itself a bad deal to the benefit of Allianz, which gets a significant stake in the two banks' retail operations, as well as majority control of Deutsche Bank's jewel DWS fund manager and insurer Deutscher Herold.


The two banks' management boards also have clashed over whether to sell Dresdner Kleinwort Benson, Dresdner's investment banking arm.


The aim also was to unravel the stakes Deutsche Bank and Dresdner Bank have in Munich-based Allianz and vice versa. Currently Deutsche Bank holds a 7 percent stake in Allianz, while Dresdner holds 10 percent. Allianz holds 21.5 percent of Dresdner and 4.9 percent of Deutsche.


Frustrated with their own uncertain futures, employees at both banks are already defecting to other institutions. T.J. Lim, head of Dresdner Kleinwort Benson's fixed-income division and a member of the merger integration team, quit Tuesday. Michael Dobson, head of Deutsche Bank's asset management division and a member of the interim new Deutsche Bank board, resigned shortly after the merger was announced. And Salomon Smith Barney earlier this week poached seven analysts from Dresdner Kleinwort Benson.


Deutsche Bank swallowed New York-based Bankers Trust last year to claim the No. 1 spot in terms of assets with $840 billion. The merger with Germany's No. 3 player, Dresdner, would have boosted that figure to $1.2 trillion - topping even the $1 trillion institution being created by the planned fusion of three Japanese giants.