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IKB to be bought by Lone Star Funds

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 precise terms of its deal to sell 90.8 percent of IKB to Dallas-based Lone Star, but officials said at a news conference that the purchase price was in the low three-digit million euros range.
That would be below the euro800 million (US$1.2 billion) that the German government had initially targeted.
KfW chief executive Wolfgang Kroh said the deal would likely be concluded by October, pending regulatory approval. While he did not disclose the exact final price, he said that this was "not a normal sale of shares but rather a complex project made up of myriad elements."
Kroh said the result was a "fair, positive purchase price."
Investors appeared happy that IKB was sold, regardless of the price. The bank's rose by more than 8 percent to euro2.90 (US$4.30) in Frankfurt trading.
"We are enthusiastic about the prospect of investing our capital, expertise, time, and energy to put IKB back on a sustainable path to long-term value creation for all stakeholders," said Bruno Scherrer, senior managing director and head of European Investments for Lone Star.
"Lone Star has the solid basis to support the strategy of strengthening IKB as a leading provider of financial solutions for Germany's Mittelstand."
IKB lends to small and medium-sized German companies, dubbed the Mittelstand in German.
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, founded in 1995, currently manages more than US$13 billion (euro88.2 billion) in assets.
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.
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).
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On the Net:
http://www.ikb.de
http://www.lonestarfunds.com


Updated : 2021-05-11 04:01 GMT+08:00