(Reuters) – Private equity investor Lone Star is expected to receive bids from some large European banks for corporate bank IKB, one of Germany’s high-profile victims of the financial crisis, two people familiar with the transaction said.
IKB was the first German bank to require a bailout during the crisis and has become one of the first to be put up for sale during a health check on Europe’s banks this year by regulators.
The bank, known before the crisis mainly as a lender to mid-sized German companies, has described the demands of the banking industry check-up as “surprisingly harsh”.
Potential bidders such as HSBC, BNP Paribas , Societe Generale, Santander and SEB received information packages on IKB in early March and have been asked to return with non-binding offers by a mid-April deadline, the people said.
Some of these banks, which all aim to expand their business with medium-sized German companies, are only interested in the corporate lending activities and not the whole bank, they added.
Lone Star, which owns 91.5 percent of IKB, has allowed bidders to consider buying parts of IKB and will likely ask for more money for its most prized assets.
“Shedding just the corporate loan business would mean that Lone Star pay itself for winding down the remaining assets, like IKB’s leasing business or back-office operations,” one of the sources said. The source added that some of the bidders could attach that part of the business to their own corporate lending operations and generate significant benefits.
Any bidder interested only in IKB’s crown asset – a roughly 10 billion euro book of loans to German corporate clients – may have to pay up to 1.2-1.3 billion euros, in line with the valuation of peers, which trade at 1.5 times book value, another source said.
IKB required several bailouts from development bank KfW and the German state after its off-balance sheet investment vehicles ran into funding problems in 2007.
Following the rescues, IKB was taken over by KfW, which sold it to Lone Star in August 2008 for 137 million euros.
In December, U.S. investor Lone Star showed it was ready to exit its German banking assets when selling property lender Corealcredit to Aareal Bank in a 342-million-euro deal.
Bankers said a sale of IKB – which posted a profit of 39 million euros for the nine-months to December – to a rival with a strong balance sheet could help the German bank pass the European bank health checks.
IKB is the smallest German bank deemed important enough to be supervised from November by the European Central Bank rather than the national regulator. IKB said last year it could meet the ECB’s demands, but it would not be easy.
IKB, HSBC, BNP Paribas, Societe Generale, Santander and SEB declined to comment, while Lone Star was not available for comment.