Germany takes 25 pct stake in Commerzbank for cash

* Germany to take 25 pct stake in Commerzbank
* Commerzbank gets extra 10 bln euros of capital
* Allianz bolsters Dresdner capital by 1.45 bln euros
* Purchase of Dresdner to close within days

FRANKFURT, Jan 8 (Reuters) – Germany is taking a stake of 25 percent plus one share in Commerzbank (CBKG.DE) in return for an additional 10 billion euro ($13.6 billion) capital injection, the country’s second-biggest listed bank said on Thursday.

It is the first time Berlin has partially nationalised a major bank in response to the global financial crisis and follows similar moves by London and Washington. Commerzbank will get a total of 18.2 billion euros in state capital plus 15 billion in guarantees.

“We are weatherproofing our bank for an economically stormy environment,” Chief Executive Martin Blessing said in a statement.

More big writedowns in the fourth quarter at Commerzbank and Dresdner Bank, which it is buying from insurer Allianz (ALVG.DE), made the move necessary by threatening the combined bank’s capital base.

Commerzbank and Allianz said they now expected the 5 billion euro takeover of Dresdner Bank to be wrapped up within days.

Analysts have said Commerzbank needed to shore up its core capital ahead of its takeover of Dresdner, which has been making losses for more than a year.

Commerzbank on Thursday used the state guarantees to raise 5 billion euros by selling a bond backed by Berlin. [ID:nL823217]

“The government will do everything in its power to make sure the merger works,” said Merck Finck analyst Konrad Becker.

The deal gives the government a blocking minority in the country’s No. 2 lender behind Deutsche Bank (DBKGn.DE).

In Berlin, the finance ministry said its move to partially nationalise the bank “… shows our responsibility towards one of the biggest German players in the financial market, which with a core capital ratio of around 10 percent will now be able to position itself successfully and competitively,” ministry spokesman Torsten Albig said in a statement.

Earlier on Thursday, Commerzbank’s shares fell by more than a fifth to an all-time low on reports of the looming capital injection by the government financial sector rescue fund Soffin.

The stock pared losses to close down 13.8 percent at 5.25 euros, giving it a market capitalisation of around 3.9 billion euros. Allianz shares fell 5.4 percent to 66.67 euros.

To gain the 10 billion euros from the government’s Soffin rescue fund, Commerzbank will issue 295 million ordinary shares at an agreed price of 6 euros each. The deal also includes a silent participation of 8.2 billion euros.

“There are two big chunks Commerzbank will have to chew: one is the 25 percent dilution effect, and the second one is the interest it has to pay on the 8.2 billion euros of common equity. This will weigh on Commerzbank’s balance sheet for some time,” said one analyst who declined to be named.

Soffin had already agreed to an 8.2 billion euro capital injection for Commerzbank late last year, making it Germany’s first commercial lender to turn to the government for help in the wake of the financial market crisis.

Allianz has agreed to bolster Dresdner Bank’s capital by 1.45 billion euros as part of the deal, the companies said. It will now have a stake of 14 percent in the enlarged Commerzbank rather than the 18 percent previously expected.

(Additional reporting by Peter Maushagen in Munich and Christoph Steitz in Frankfurt; editing by Elaine Hardcastle)

Thu Jan 8, 2009 1:10pm EST
By Jonathan Gould

Source: Reuters

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