FRANKFURT: Deutsche Bank AG’s top investor, China’s HNA Group Co, plans to exit its entire stake in Germany’s largest lender as it reverses a debt-fueled acquisition spree, according to people briefed on the matter.
The cash-strapped conglomerate, which most recently still held almost 8% of the voting rights, is selling the investment after China demanded that it focus on its airline business, said the people, asking not to be identified in discussing non-public information. It’s not clear how HNA would sell the stake, which it controls through a series of complex derivatives.
Officials for HNA and Deutsche Bank declined to comment. The Wall Street Journal reported earlier Friday that the Chinese government had told HNA to exit the stake, citing unidentified people familiar with the matter.
A disposal would add to pressure on Deutsche Bank, whose shares have slumped amid several unsuccessful turnaround efforts, and could act as a catalyst amid speculation that it may need to merge with another lender in the long run. For HNA, the sale would mark the unwinding of one of the most high-profile investments made during a multi-year acquisition spree that cost the company tens of billions of dollars.
Deutsche Bank shares fell 2.1% at 12.25pm in Frankfurt trading, bringing losses this year to 40%.
HNA held as much as 9.9% in Deutsche Bank in 2017 through a combination of outright holdings and options, but it’s been reducing the investment and replacing actual shares with financial instruments. Most of the stake is now controlled through derivatives that limit HNA’s losses, meaning the disposal may not affect the share price as much.
HNA previously said it was committed to the stake, but the government instructed it to focus on its main business of travel and stop diversifying through acquisitions when China’s top leaders earlier this year agreed to help HNA raise funds, people familiar with the matter have said. This year alone, the company has sold more than US$17 billion in assets, including its holdings in Hilton Worldwide Inc.
HNA plans to gradually exit its Deutsche Bank stake over the next 18 months, the Wall Street Journal said. The company is also in talks to sell Ingram Micro Inc. and Swissport International Ltd, the newspaper said, citing people familiar with the matter.
HNA is still burdened by one of the largest interest expenses in the world. In July, it was roiled by the sudden death of co-Chairman Wang Jian, a tragedy that threw a wrench at its normalisation plans as Wang was said to be the mastermind behind the purchase of many of the assets that are now being sold.
At Deutsche Bank, HNA’s exit would leave a void that could attract other strategic buyers. Cerberus Capital, the US buyout firm run by Stephen Feinberg, is already a top investor in Deutsche Bank and also holds a large stake in rival Commerzbank AG. That has prompted speculation in the past that it may seek to combine the two.
Deutsche Bank Chief Executive Officer Christian Sewing in April unveiled the bank’s fourth turnaround plan in three years. He aims to cut around 4,000 jobs this year in an effort to slash costs and focus on the bank’s European clients.
HNA has long been a controversial shareholder for the lender. Former CEO John Cryan initially refused to meet with its executives, people familiar said at the time. He eventually relented when the issue fueled tensions with Deutsche Bank Chairman Paul Achleitner, who was personally involved in wooing the investor.