NEW YORK (The Deal) -- The Deutsche Bank (DB) takeover of Deutsche Postbank faces further months of delay and possibly up to €1.6 billion ($2.14 billion) of compensation payments, after the country's Federal Supreme Court sent a minority shareholder's case back to the appeals court to investigate a alleged concert party deal.
In a Tuesday, July 29 decision, the court declined to give regulatory clearance to the takeover, which began with Deutsche Bank's 2008 agreement to acquire a 29.75% stake in Postbank from its majority shareholder Deutsche Post for a price of €57.25 a share. The court sent the case back to the regional High Court in Cologne to examine whether Deutsche Bank and Deutsche Post had been acting in concert.
Deutsche Bank followed the initial purchase agreement with a revised deal with Deutsche Post in January 2009, at the height of the financial crisis, when the two sides agreed that the original all-cash offer should be amended with a complex paper deal. Deutsche would acquire 22.9% of Postbank in exchange for an 8% stake in itself, and buy €2.7 billion worth of convertible bonds that represented an additional 27.4% Postbank holding. On top of that it also extended €1.1 billion in collateral for options on the remaining 12.1% Postbank stake owned by Deutsche Post.
Importantly, as The Deal reported at the time, Deutsche Bank had already paid €3.1 billion of the total €3.9 billion due at closing but [would] have to wait three years to convert the bonds to Postbank stock. "That will delay a mandatory offer for the outstanding minority stake," The Deal reported at the time, "but give Post access to all the cash in the deal, several years ahead of the earlier agreement."
When Deutsche Bank finally increased its stake beyond the 30% threshold, triggering a mandatory general offer to shareholders in 2010, it made the offer at the-then prevailing price of €25.00 a share.
Stock exchange newsletter publisher Effecten-Spiegel AG, initially accepted the €25.00 for its minority holding in Poistbank. But it subsequently sued Deutsche Bank, alleging that the 2009 deal amounted to a concert agreement between the bank and Deutsche Post and demanding compensation of €4.6 million.
Deutsche Bank has hitherto denied any wrongdoing and has previously prevailed in the lower courts.
The Supreme Court's ruling only removes the judgment in favor of Deutsche Bank, without finally deciding the case. So it is now down to the lower court to decide on whether the terms of the initial agreement amounted to an action in concert and whether Deutsche Bank should pay compensation and how much.
If compensation is payable to Effecten-Spiegel, it may also have to be paid to other minority shareholders who accepted the €25 offer. But German media reports said this may be more complicated than it appears, since the Dusseldorf publisher's suit would not automatically lead to payouts for all.
Other minority shareholders who had not yet make claims would have to do so separately, the news agency dpa-AFX said, citing the shareholders' association Deutsche Schutzvereinigung fur Wertpapierbesitz, or DSW. According to the DSW's Marc Tungler, by the time the Cologne court had ruled, and the case had possibly then returned to the Supreme Court for endorsement, such claims might be out of time.