Dallas-based private equity fund Lone Star has entered the fray for Berlin-based loss-making bank Bankgesellschaft Berlin, submitting an eleventh hour bid which pitches it against fellow US private equity firm Texas Pacific.
Lone Star confirmed its intentions to bid for the bank immediately before the 31 January deadline, adding that it would seek greater access to the bank’s financial information.
Lone Star had been one of the favourites to acquire the bank last year, but pulled out of due diligence in December because it did not receive sufficient information on the bank’s assets.
The Dallas-based fund is bidding against BGB Capital consortium, which comprises US investor Christopher Flowers and private equity firm Texas Pacific Group, for the City of Berlin’s 81 per cent stake in the bank.
BGB Capital Partners is reportedly prepared to do a deal without further due diligence for Bankgesellschaft Berlin, which is valued at around E1.8bn, although BGB’s proposal would require Berlin to take on most of the risk of future bad loan losses at the bank.
Bankgesellschaft, Germany's tenth-largest banking group, avoided becoming the latest in a string of major German insolvencies at the beginning of the year when Berlin's new senate voted to cover all the bank's potential liabilities for the next 30 years, which could run to as much as E21bn. In 2001, the City of Berlin fully underwrote a E1.7bn capital increase for the group to underwrite nearly E22bn of potential real-estate liabilities at the bank.
Lone Star said that any additional guarantees or further risk-sharing arrangements from the city of Berlin would be likely to break EU rules. The European Commission is still deciding whether the aid granted in 2001 was legal under European Union competition rules.
Thilo Sarrazin, the Berlin state finance minister, plans to name a successful bidder in the near future following protracted negotiations in 2002 which saw the auction delayed in May and December. Schroder Salomon Smith Barney is running the sale process.