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KfW Bankengruppe signs agreement with Lone Star to sell its shares in IKB
Frankfurt (ots) -
- Major milestone toward ending a thus far unique rescue mission to stabilise the financial market and the German economy - Continued existence of the SME bank IKB assured - Lone Star announces its intention to ensure IKB's existence
At its meeting as at 20 August the Executive Committee of the Board of Supervisory Directors of KfW Bankengruppe decided to recommend to KfW's Board of Supervisory Directors to sell KfW's shares in IKB to Lone Star. The Managing Board of KfW Bankengruppe and Lone Star today signed the corresponding purchase agreement in Frankfurt am Main. According to the agreement, Lone Star will purchase all of KfW's holdings in IKB of approx. 90.8%. KfW Bankengruppe has thus reached the crucial milestone for the end of the IKB rescue mission and the sale of its shares in IKB Deutsche Industriebank AG to a private investor.
The selling process including the selection of the buyer was carried out by KfW in consultation with its Executive Committee. The sale still needs to be approved by KfW's Board of Supervisory Directors and by others including BaFin, the German Federal Financial Supervisory Authority, and the European Commission. The closing of the agreement is expected by October 2008.
In the purchase agreement signed today KfW was able to achieve an adequate, positive purchase price and to reach an agreement on sharing certain portfolio risks and risks of legal action. Among other things, KfW will acquire a smaller share of IKB's on-balance portfolio than originally planned. Lone Star will also provide IKB with additional equity. Both contracting parties agreed to keep further details on the purchase agreement confidential.
As at 31 December 2007 the overall charge from the IKB crisis that was posted in KfW's balance sheet added up to EUR 7.2 billion. KfW will post additional charges when the transaction is completed, yet a current valuation puts their total at less than 10% of the above stated costs arising from the rescue measures.
Wolfgang Kroh, Speaker of the Managing Board of KfW Bankengruppe, underscored that the solution that has now been found meets the key objectives of the IKB rescue efforts. A collapse of IKB was prevented and IKB will retain its role as a bank for small and medium-sized enterprises, the Mittelstand. Germany's financial market has been stabilised and major damage to the German economy has been averted. "In order to attain the goals of the IKB rescue mission, KfW took on an extraordinarily heavy burden, but one that is not too heavy to handle. We remain on solid financial footing. What is important is that we have now closed the chapter on IKB's rescue. We do not face any more unforeseeable risks with regard to IKB. We can now go back to concentrating fully on our work as a promotional bank", said Kroh. "The decision by KfW's Executive Committee to accept our offer marks a great success for Lone Star. We look forward to the task at hand - investing capital, expertise, time and all our efforts in order to put IKB back on a sustainable course of long-term value added. Lone Star offers the basis for implementing the strategy of strengthening IKB as a leading provider of financial solutions for the German Mittelstand", commented Bruno Scherrer, Senior Managing Director and Head of European Investments of Lone Star.
Dr Günther Bräunig, CEO of IKB Deutsche Industriebank AG, is pleased that the selling process has come to a successful close. For IKB, its staff and its customers, a long period of uncertainty has now come to an end. "Having a new owner, Lone Star, gives the bank a fresh start and lends new dynamism to the business model of a commercial bank that targets the Mittelstand - a model that is so important in Germany", said Bräunig.
N.B.: The statement by the Speaker of the Managing Board of KfW Bankengruppe, Wolfgang Kroh, is available for download from www.kfw.de
Background: Chronology of KfW's shareholdings in IKB Deutsche Industriebank AG, Düsseldorf
1985: KfW initially assumes a stake in IKB of approx. 1% at the request of the German Government because Stiftung Industrieforschung is unable to exercise its subscription rights during a capital increase.
2001: KfW purchases the total share package of 33.2% being offered for sale by Allianz and Munich Re. The aim is to maintain IKB's role as a key provider of SME finance. The purchase is passed unanimously at the end of 2001 by both KfW's Managing Board and its Board of Supervisory Directors.
2003: In connection with its merger with DtA, KfW increases its stake by another 3.6% which had been in DtA's portfolio.
2008: As at 30 June 2008 KfW's holdings in IKB are at around 45.5%. A capital increase in August 2008 increases KfW's shares in IKB to approx. 90.8%, and, subject to approval by various bodies and institutions, these shares are now being sold to Lone Star as per an agreement dated 21 August 2008.