Deutsche Bank has valued its asset management division DWS at €7.2bn ahead of its planned initial public offering (IPO).
Shares in DWS will be offered on the Frankfurt Stock Exchange in the earliest available window, subject to market conditions.
The planned IPO is expected to consist purely of the sale of existing shares indirectly held by Deutsche Bank, so no new shares would be sold.
Deutsche Bank said Nippon Life Insurance Company had agreed to acquire a 5% stake in DWS at the issue price as an anchor investor, with the two firms also agreeing a five-year strategic partnership that will see additional assets under management brought under the DWS name. Nippon Life will be represented on DWS's supervisory board.
According to previous reports on Reuters, the bank wants to offer 25% of DWS, which was rebranded from Deutsche Asset Management in December last year, for an expected €1.5bn to €2bn.
DWS employs around 3,800 staff, manages around €700bn AUM and is a top five asset manager operating in Europe. It runs €513bn in active assets, EUR 71bn in alternatives, and €115bn in passives, with its Xtrackers brand the second largest ETF provider in Europe.
Under the plans, the unit will operate in the form of a KGaA (Kommanditgesellschaft auf Aktien) legal structure which gives external shareholders less control rights than in a normal stock company, according to the Financial Times.
For instance, Deutsche Bank will still be able to name DWS' top management without the consent of external shareholder representatives.
The Supervisory Board will comprise twelve members and is expected to include five independent members, four employee representatives and three Deutsche Bank representatives. Karl von Rohr, chief administrative officer of Deutsche Bank, is designated to become chairman of the Supervisory Board of DWS.
Meanwhile, the Deutsche Bank distribution channel contributes 12% of current AUM for DWS, and a ten-year distribution agreement has been signed for after the IPO. DWS and Deutsche Bank have also entered into an agreement which covers certain administrative services.
The asset management unit said the planned IPO will enhance the external profile of DWS, while it will have a new compensation framework that "better aligns remuneration to the needs and performance of the asset management business and that will provide DWS with increased capacity to attract and retain talent".
In addition, the group said the IPO provides greater flexibility to control costs as well as "enabling it to capture both future growth opportunities and select bolt-on acquisitions".
Nicolas Moreau, chief executive officer of DWS, said: "We are convinced that the planned IPO will act as a catalyst to support our strategy and deliver shareholder value."
In the medium term, the asset management unit is targeting net inflows of 3% to 5% of assets a year, an adjusted cost-to-income ratio of less than 65%, a management fee margin greater than or equal to 30 bps, while it plans to pay out between 65% and 75% of net income in dividends.
Commenting on the plans, James von Moltke, chief financial officer of Deutsche Bank, added: "DWS is a strong asset management business that will gain visibility and agility through this planned listing. DWS's clients, employees, as well as its shareholders, including Deutsche Bank, will stand to benefit."
It was reported in October 2016 that Deutsche Bank was planning to list a minority stake in the asset management arm as part of an overhaul and potentially rebuild its capital following a string of fines.
In March 2017, the Financial Conduct Authority fined Deutsche Bank £163m, its largest ever anti-money laundering fine, as it alleged the bank's framework was used to transfer $10bn from Russia to offshore accounts in a manner 'highly suggestive of financial crime', while US regulators fined the group $425m.
A public listing of a minority stake in the asset management arm would enable the firm to keep management control while raising capital that would reduce the size of a potential rights issue, according to recent reports.
However, it would reduce the amount of profit the firm is able take from the business, its best-performing division.
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