Allianz, Dresdner merger still on schedule

Frankfurt, May 17: GERMAN insurer Allianz AG said on Thursday that its takeover of Dresdner Bank was proceeding according to plan but remained silent on key details despite investor doubts about its benefits. “Preparations for the integration are going ahead at full steam in both companies—we are fully in line with our ambitious time plans,” Allianz management board member Reiner Hagemann told a joint video news conference. Pressure on Allianz to justify its friendly 22.9 billion euro ($20.12 billion) cash-and-stock bid intensified a week ago when Dresdner Bank disappointed the market with weaker than expected first-quarter pre-tax profit. Dresdner’s rising administrative expenses drove its cost-income ratio to 84.5 per cent, making it one of Europe’s least-efficient banks and begging the question how Allianz plans to get costs at its new unit under control. Allianz on Thursday, however, repeated that it was withholding details on cost and earnings synergies pending its legal, formal offer planned for May 31, adding only that the integration process was expected to take three to five years. Allianz is expected to behave with extreme caution with integration details to comply with US takeover rules that it must respect since it joined the New York Stock Exchange (NYSE) last year. Allianz shares have improved only slightly since the deal announcement in early April while Dresdner’s have moved in tandem, signalling market participants’ near certainty that the deal will be completed as planned. Allianz is expected to formalise its bid plans at the end of the month. It will then be up to Dresdner shareholders to decide whether to accept the offer but it is expected to go ahead.

But Allianz’s news blackout since the takeover announcement has aggravated demands to provide convincing arguments and hard facts on the savings and earnings advantages it hopes to achieve with the takeover. “The jury is very much out, and walked out looking pretty grumpy,” said insurance analyst Tom Bennett at BNP Paribas in London. “Sentiment is pretty negative at the moment,” Mr Bennett said that the May 31 news conference would be a “decisive moment” in terms of improving investor sentiment.

Dresdner threw itself into Allianz’s arms last month after two failed merger attempts with rivals Deutsche Bank and Commerzbank AG and a surprise write-off in real estate assets revived takeover speculation last year. (Reuters)