Lone Star walks away from Bankgesellschaft

Lone Star has withdrawn from the bidding for Bankgellschaft Berlin, leaving joint bidders TPG and Christopher Flower alone in the auction.

Lone Star Fund, the Dallas-based private equity firm, has pulled out of the bidding for Bankgesellschaft Berlin, leaving BCB Capital Partners, the name given to the consortium of Texas Pacific Group and investor Christopher Flowers, as the only remaining bidder in the auction for the troubled German bank.

Lone Star’s departure means the City of Berlin, which owns 81 per cent of the bank, will extend the auction deadline to January 31, 2003, in an effort to enable new bidders to emerge. The auction is being co-ordinated by the city finance minister, Thilo Sarrazin.

Lone Star said in a joint announcement with the City of Berlin that it pulled out of due diligence because it was not getting enough information on BGB’s assets.
Lone Star’s withdrawal does not necessarily guarantee the victory of BGB Capital, a spokesman for Sarrazin told the Daily Deal. “Both bids were very different, but just because Lone Star’s gone, one cannot assume BGB will win.”

TPG confirmed today that it is still in talks with Bankgesellschaft but declined to comment further. The group has tried its hand at turning around banks before. It has restructured American Savings Bank and Korea First Bank.

The group is believed to be keen on maintaining all of Bankgesellschaft’s business operations, but aim to cut jobs to increase competitiveness. It plans to turn the bank around within three to five years and subsequently sell it on in the capital markets, sources said.

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.

That decision cleared the way for a sale of the City of Berlin's stake in the bank, which rose to 81 per cent after it fully underwrote a E1.7bn capital increase for the group to make up for the losses it had incurred in its real estate business.