Cuts as Deutsche unveils deal today
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Your support makes all the difference.PLANS to slash at least $1bn of costs over the next three years are expected to be announced when Germany's Deutsche Bank and Bankers Trust of America unveil the details of their $9.5bn merger at the German bank's headquarters in Frankfurt today.
It is believed that Deutsche may have agreed to buy out up to $600m of stock options held by senior Bankers Trust executives in order to secure their full backing for the deal.
As many as 3,000 jobs, many of them at Deutsche's American operations, could go. Job cuts in the City of London - where there is overlap between Deutsche, with 6,000 staff, and Bankers Trusts' broking arm BT Alex. Brown, with 2,500 - could amount to between 500 and 1,000, said analysts.
The new combined entity, to be called Deutsche Bankers Trust, will be the world's biggest bank, overtaking Switzerland's UBS with $800bn of assets.
A committee headed by Frank Newman, the Bankers Trust chairman, and Josef Ackerman, Deutsche's head of investment banking, will be formed to oversee the integration of the two banks. Mr Newman will join Deutsche'smanagement board. It adopted English as its working language several years ago.
Also joining the integration committee are Bankers Trust's Yves De Balmann, Mayo Shattuck and Mary Cirillo, and from the Deutsche Bank side, Edson Mitchell and Mike Phillipp. The overlap is particularly acute on the foreign exchange and fixed income trading side.
"How aggressive Deutsche Bank will be in cutting the overlap remains to be seen," said Mathew Czepliewicz, an analyst at Salomon Smith Barney, the investment bank. "One problem is that areas of overlap are also areas of high revenue."
Terms of the deal, which is being structured as a takeover bid by Deutsche for Bankers Trust at $93 a share, were to be approved by the boards of the two banks at meetings last night.
A key issue will be how Deutsche finances the deal. There was talk late last week that it may seek to raise the bulk of the funds through the innovative technique of allowing Bankers Trust shareholders to take some of Deutsche Bank's holdings in DaimlerChrysler, the auto giant, in exchange for Bankers Trust shares.
Deutsche may seek tax concessions from the German government to allow it to sell some of its considerable holdings in German industrial companies without attracting the punitive capital gains tax. However, most analysts believe that some element of capital increase will be needed to fund the deal.
Critics of the deal argue that Deutsche has a long way to go to persuade its shareholders that it can integrate another bank successfully.
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