Aberdeen to buy Deutsche units, plans rights issue

Aberdeen Asset Management Plc is to buy most of Deutsche Bank's funds businesses in the UK for up to £265 million, significantly boosting its size and helping it enter new markets.

Aberdeen said yesterday that £215 million of the price tag would be funded via a fully underwritten and deeply discounted rights issue of three new shares at 63 pence each for every two existing shares.

Aberdeen shares were up 11.8 per cent at 137 and a half pence by 0840 GMT, trading at levels not seen since September 2002. Deutsche Bank shares were 1.7 per cent lower at €64.6.

The rights issue was discounted so deeply to ensure a successful take-up, Aberdeen Chief Executive Martin Gilbert told reporters in a conference call.

"That ability to say it was done was a very crucial factor in the negotiations with Deutsche," said Mr Gilbert, referring to the rights issue which was underwritten by JP Morgan Cazenove.

Deutsche's loss-making UK operation has long been a drain on the group. But Dirk Becker, an analyst at Keplar Equities, said the sale, which marks Deutsche's effective departure from fund management in Britain, was disappointing.

"They have now sold their position in one of the biggest fund management markets in the world and for little money."

"UBS and Credit Suisse had the same problems but they fixed them. It would have been a sign of management strength if they had cleaned up this business. Deutsche is impatient."

Aberdeen said the acquisition of Deutsche Asset Management Group Ltd's businesses was a "transformational" deal and was expected to materially enhance earnings from completion.

"We are acquiring some world-class businesses that will substantially increase our scale and diversify our revenue streams," Mr Gilbert said.

Aberdeen said the deal would reduce its exposure to equities and give it a sizeable fixed-income business.

Businesses included in the deal include several UK Deutsche businesses and a fixed income business in Philadelphia. The German bank is not selling its UK-based hedge fund and real estate businesses and its Philadelphia-based high yield business.

"The objective is to create a stronger, more focused DeAM business," said Kevin Parker, Global Head of Deutsche Asset Management and a member of Deutsche Bank's Group Executive Committee.

Earlier this week, people familiar with the situation said Aberdeen had squeezed past rival bidder BNP Paribas to enter exclusive talks to buy the Deutsche businesses.

Aberdeen, which plans to use bank borrowings to fund the balance between the deal amount and the cash raised from the rights issue, said it intended to maintain its dividend policy following the acquisition.