Deutsche Bank AG plans to raise as much as 1.8 billion euros ($2.2 billion) in an initial public offering of its asset-management unit, a key pillar of the German lender’s turnaround strategy.
The offering values the asset manager at as much as 7.2 billion euros, a valuation that would align it with its bigger peer Amundi SA. Nippon Life Insurance Co. agreed to acquire a 5 percent stake in DWS in the IPO at the issue price that will be set between 30 euros to 36 euros a share, Deutsche Bank said in a statement.
A successful offering of DWS after a surge in market volatility would mark an important achievement for Deutsche Bank Chief Executive Officer John Cryan, who proposed the sale a year ago to help bolster the lender’s capital. The unit — headed by Nicolas Moreau — will also gain more independence and flexibility for acquisitions at a time when firms are under pressure to expand.
If priced in the top half of the range, DWS would achieve a similar valuation to French asset manager Amundi SA, which has about double DWS’s assets. Companies typically sell shares at a discount to their target valuation to lure buyers.
“I had expected a target valuation of up to 8 billion euros so the given range is not very ambitious,” said Ulf Moritzen, an portfolio manager at Aramea Asset Management with 3.5 billion euros under management, including Deutsche Bank stock. “But I expect positive news flow after the IPO and would buy into it up to a valuation of as much as 7 billion euros.”
Attractions of DWS include its diversified portfolio across many asset classes and global scale, Barclays Plc analyst Daniel Garrod wrote in a client note in late February. A return to net money outflows and failure to cut costs are major risks to the business, he said.
The unit has also had a mixed performance across regions. While assets under management in Germany have been increasing, with a particularly strong jump in the second quarter of last year, its US funds have yet to recover from the massive outflows suffered in 2016.
DWS said it will enter into a strategic partnership with Nippon Life that will see the Deutsche Bank subsidiary manage some assets for the Japanese insurer. It will also involve joint product development and “opportunities for distribution,” according to the statement.
Shares of Deutsche Bank climbed about 1 percent in Frankfurt trading to 13.16 euros as of 11:17 a.m. The stock is the second-worst performer this year on the 42-member Bloo-mberg Europe 500 Banks and Financial Services Index, with a decline of about 17 percent. DWS has a 30-percent stake in a Chinese joint venture, Harvest Fund Management Co. Ltd, but can’t consolidate the company’s more than $100 billion in assets under management because it only has a minority stake.
Deutsche Bank tried to sell much of the asset management unit in 2012, but stopped when it couldn’t get enough money. Now the business is targeting net inflows of 3 percent to 5 percent of assets a year, a number that may be difficult to reach after several key funds saw recent outflows,
according to Autonomous Research.