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Germany's IKB to be bought by Lone Star Funds

Germany's IKB to be bought by Lone Star Funds

German lender IKB Deutsche Industriebank AG, which has been badly hit by the U.S. subprime mortgage crisis, will be sold to U.S.-based private equity firm Lone Star Funds, the German company's biggest shareholder said Thursday.
Germany's state-owned KfW development bank did not give the terms of its deal to sell 90.8 percent of IKB to Dallas-based Lone Star, but said it would give a news conference later Thursday.
The news cheered IKB investors who pushed up the bank's shares by more than 7 percent to euro2.87 (US$4.22) in Frankfurt trading.
KfW currently holds a 45.5 percent stake in Duesseldorf-based IKB, but that will rise to 90.8 percent as part of an already agreed-upon capital increase.
KfW had been shopping IKB around for nearly a year and its governing council agreed late Wednesday that Lone Star would be the right buyer.
Lone Star agreed last month to buy asset-backed securities with a nominal value of US$30.6 billion (euro20.8 billion) for US$6.7 billion (euro4.5 billion) from Merrill Lynch & Co.
Lone Star, founded in 1995, currently manages more than US$13 billion (euro88.2 billion).
The value of asset-backed securities _ especially those backed by mortgages _ have plummeted over the past year as the underlying loans have increasingly defaulted. Those losses have forced investment banks like Merrill Lynch to raise new capital to offset the losses.
Duesseldorf-based IKB's problems sprang from its Rhineland Funding investment vehicle's apparent inability to cover its funding needs because of exposure to U.S. subprime loans.
That prompted a series of rescue packages for the bank that totaled more than euro8 billion (US$11.8 billion).
IKB lends to small and medium-sized German companies.
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On the Net:
http://www.ikb.de