China Development Bank, and buyout firms Blackstone, Apollo and J.C. Flowers have all made preliminary bids for failing German lender WestLB, Reuters reported. The bank is probably heading for a breakup, Reuters wrote, as the bidders would likely spin off the firm’s risky assets, as well as wind down investment banking and international banking operations. The deadline for offers in the auction is February 11, Reuters said.
(Reuters) – Stricken German lender WestLB [WDLG.UL] is headed for a breakup as time runs out to find a solution for the bank as a whole, two people familiar with the matter said on Sunday.
If no buyer for the whole lender can be found — and at present no potential candidates are in sight — all risky assets will be split off and a core bank doing business with savings banks will remain, the sources told Reuters.
WestLB businesses such as investment banking and international banking will be wound down unless a buyer turns up, they said, adding the WestLB’s bad bank is likely to be used for this purpose.
But talks between the owners over who will cover the costs are still ongoing.
The breakup of WestLB — once Germany’s most powerful public sector bank — does not come as a surprise.
The European Commission has demanded a change of ownership at WestLB by the end of 2011, in return for a state bailout the lender got in the financial crisis.
Sources had told Reuters last week that a breakup of the lender could only be averted with extra time. But the European Commission made it clear on Wednesday that it will not extend a Feb. 15 deadline to restructure the bank.
The deadline for the remaining four bidders to submit offers in an ongoing auction is Feb. 11.
According to a newspaper report, state-owned China Development Bank [CHDB.UL] and buyout firms Blackstone (BX.N), Apollo (APOL.O) and J.C. Flowers have handed in preliminary offers.
But analysts and investment bankers have said a sale of the complete bank is unlikely given the lack of a viable business plan for the regional lender.
(Reporting by Matthias Sobolewski, Matthias Inverardi, writing by Arno Schuetze; Editing by Bernard Orr)