Cerberus Capital Management fund decided to review European assets
The U.S. investment fund Cerberus Capital Management announced the sale of shares in two German banks – Deutsche Bank and Commerzbank. The company plans to get rid of 21 million Deutsche Bank securities, while it owns a total of 62 million shares. Cerberus will also sell 25 million Commerzbank shares of its 63 million shares. Analysts estimate that the investment fund will receive about $500 million after the sale at the current price of the banks’ securities.
Cerberus has owned stakes in German financial institutions since 2017 and is one of the banks’ largest shareholders. The fund owns 3% of Deutsche Bank securities and 5% of Commerzbank ones. The reason for the sale of securities was unjustified expectations. Earlier Cerberus analysts had staked on the fact that the rapid pace of recovery of the European economy would provide a good boost to banks’ profits, but this did not happen. The indicators in the European Union were growing rather slowly, and the processes in the financial system of Germany limited the development of the institutions. The fact is that three types of banks compete with each other in the country – commercial, state land, and savings banks provide almost the same terms of cheap loans. This market situation prevents Deutsche Bank and Commerzbank’s profits from increasing at a rapid pace.
After Cerberus acquired a stake in Commerzbank in the summer of 2017, its value fell 31%. Meanwhile, the Stoxx 600 Banks index was down 18%. Deutsche Bank’s share price fell 21% over the same period while the industry index fell 14%. The two banks wanted to merge assets in 2019, but the deal did not go through, and they continued to develop in parallel.
Cerberus Capital Management deals with direct investments, including distressed investments. Founded in 1992, the company now has more than $45 billion under management, concentrated in funds and accounts. Cerberus invests in a variety of sectors, including health care, technology, and communications companies, government and financial services, construction, manufacturing, real estate, and others. The investment portfolio contains more than 40 companies, localized in different countries, with an average retention rate of 5 years or more.
Cerberus staff includes more than 100 employees, who carry out the analysis, monitoring, and maintenance of portfolio investments. The fund’s professionals are directly involved in the operations of its assets; they serve as directors, take care of strategy planning, staffing, and other critical processes. Cerberus is headquartered in New York and has offices in European and Asian countries.