WestLB’s owners – the bank’s home state of North Rhine-Westphalia, with savings banks from the same region – want to sell the bank in compliance with EU demands for a change of ownership.
However, while four potential bidders have been asked to submit offers before the EU deadline, people familiar with the bank say it is unlikely that a single buyer can be found.
Attempts to engineer
a merger between WestLB and other German public sector banks are also being all but ruled out, with other Landesbanken shunning a role in a rescue.
According to people familiar with talks over WestLB’s future, the bank’s owners are being pressed to underwrite what is likely to be a three-way split of WestLB, with hopes for a partial sell-off of some assets along with a transfer of other business to other parts of Germany’s state banking sector.
Unwanted assets could be added to a
“bad bank” already set up by WestLB when it hived some toxic securities off its balance sheet last year.
Without such a commitment from WestLB’s owners, government representatives say it risks becoming the first German bank to be subject to a controlled restructuring and wind-down under a
law approved last year.
A first use of such a procedure could increase nervousness in the German banking sector, with one bank chief executive saying it would be a “worst-case scenario”.
But Germany’s government is determined to persuade WestLB’s owners that the bank may be forced into such a procedure unless a restructuring plan is agreed before February 15.
Joaquín Almunia, EU competition commissioner, has said the deadline would not be extended and that, if no plan is accepted, WestLB could have to repay €3.4bn in state aid that Brussels believes the bank received when it set up its “bad bank”. Mr Almunia is due in Berlin for talks this week.
Friedrich Merz, a German lawyer and politician, is overseeing efforts to sell WestLB and has said there are at least four expressions of interest, with bidders required to make non-binding offers by February 11, shortly before the EU deadline.
China Development Bank, China’s largest state-owned “policy” bank, has been approached to potentially take a large stake but is unlikely to ultimately proceed with a takeover, according to people familiar with the matter.
Top executives from CDB and WestLB held a meeting three weeks ago to discuss a possible deal. The discussion was initiated by WestLB’s owners and CDB had not been actively looking to acquire a German bank, according to one person familiar with the discussions.
Other potential bidders for parts of WestLB may include Blackstone and Lone Star but people familiar with the US investors say they are unlikely to be interested in the whole bank.