Kleinwort Draws Wide Trade Buyer Interest

LONDON (Reuters) – Commerzbank AG (CBKG.DE) unit Kleinwort Benson has attracted interest from more than 20 trade buyers as well as up to 10 private equity firms interested in backing an MBO, said a person close to the private banking unit.

Goldman Sachs (GS.N) has been putting together a sales memorandum with executives at Kleinwort Benson which is likely to go out to interested parties next week.

The source picked out Asia-focused British lender Standard Chartered (STAN.L) as one potential trade bidder.

The deal will be decided some time in the third quarter of this year, with bids expected by the end of next month, the source said.

A state-backed rescue plan for Commerzbank last week received the go-ahead from the European Union antitrust regulator, contingent on a series of asset sales, including its Eurohypo property finance unit and Kleinwort Benson.

The deadlines for the sales — which amount to about 45 percent of Commerzbank’s current balance sheet total — have not been disclosed.

Kleinwort Benson executives are in a second round of talks with private equity backers about a management buy out (MBO), examining how successful its business model might be in the current market. They are hoping to have some commitments in the next week or two, the source said.

Management is keen to take the lead in finding a viable MBO deal or a trade buyer which keeps the franchise. They want to counter a potential deal with a trade buyer that may be lucrative for Commerzbank but fails to continue the existing franchise, the source said.

DISCOUNT FOR MBO?

The source said Kleinwort Benson expects Commerzbank to consider a private equity-backed MBO which comes in at a modest discount to trade bids — fearing that disgruntled executives at the unit might stymie any subsequent trade buyer talks.

The source cited a book value of about 300 million pounds ($455.1 million) around which bids might be based.

Trade parties cited in media reports as potential suitors also include British fund manager Schroders (SDR.L).

The source said: “The names in the news stories are the right names, but there are a lot more than that.”

“There are potentially more than 20 people who want to look at the sales memorandum on the trade buyer side,” he said. On the private equity side, there are five to 10 private equity firms who are ready to look at supporting an MBO.

“There is a feeling that there is a great opportunity of a lifetime on an MBO but it’s going to be one hell of a slog to do everything that needs to be done,” said the source.

“At the same time there are some potential trade partners that could be really interesting. They see KB as strategic to their plans.” ($1=.6592 Pound)

By Joel Dimmock

(Editing by Steve Slater and David Cowell)