Deutsche Post World Net AG will sell a 29.75 percent stake in Deutsche Postbank AG (to Deutsche Bank AG (DB) in a 2.79 billion euros cash deal that will substantially improve Deutsche Bank's access to the German retail banking market, where it wants to expand, Deutsche Bank and Deutsche Post World said Friday. Deutsche Bank has the option to acquire an additional 18 percent of Postbank for 55 euros a share. The initial stake buy equates to a per-share price of 57.25 euros. Analysts had pegged Postbank's buying price at 50 euros to 54 euros a share. Deutsche Bank will also get the first right of refusal on the remaining Postbank shares. Postbank was effectively the last big target for Deutsche Bank in its German home market and, by taking a minority stake, analysts say it has staked a claim on the bank without being forced to raise capital in currently difficult markets. Spanish banking giant Banco Santander SA (STD), which has weathered the financial crisis better than many of its peers, on Thursday said it had submitted an indicative bid for Postbank. Commerzbank AG (kicked off the current round of major deals on Aug. 31, when it agreed to buy Dresdner Bank for 9.8 billion euros from Allianz SE, Europe's largest insurer by market value. The deal combines Germany's second and third-largest banks by assets to create a more formidable domestic rival to Deutsche Bank. Although there's now little room at the top, the German banking sector is highly fragmented, with municipal-owned savings banks and cooperative banks dominating retail business, leaving major banks such as Deutsche Bank, Commerzbank and Dresdner Bank struggling to win market share. Germany's municipal and state-controlled banks, such as WestLB AG, SachsenLB, Landesbank Baden-Wuerttemberg, or LBBW, and BayernLB, suffered badly from the US subprime crisis, effectively forcing them to consolidate in order to survive. Sachsen was bought by LBBW, and WestLB, whose merger talks with Hesse-based peer Landesbank Hessen-Thueringen, or Helaba, came to naught, is reportedly still in the market for a partner. In August US investor Lone Star Funds agreed to buy high profile subprime victim IKB Deutsche Industriebank from German state- owned development bank KfW Bankengruppe. The acquisition was a turning point for IKB, a small-cap lender for German small and midsize companies, which became Germany's first prominent casualty of the subprime mortgage meltdown. The bank needed capital injections of roughly EUR10.5 billion. No purchase price was given at the time but was later reported to be 115 million euros. Foreign banks were until recently reluctant to take part in German retail banking M&A, which offered lower income returns than other less fragmented and underdeveloped markets in Europe. French savings bank Credit Mutuel this summer agreed to pay around 4.9 billion euros for Citigroup's German retail bank, outbidding Deutsche Bank by 900 million euros.
