Deutsche & UBS Asset Management Units Merger Talks Hit Pause

Merger talks between Deutsche Bank’s (NYSE:DB) asset management unit — DWS — and UBS Group (NYSE:UBS) have halted over arguments as to which company will retain the controlling power of the combined asset management businesses. The merged units are estimated to be worth about €1.4 trillion in assets under management.

The deal would have got the combined business nearly at same level with the Europe’s largest money manager, Amundi. Also, it would have had the ability to compete with the world’s largest asset manager, BlackRock (NYSE:BLK) .

The key problem remains the relative valuation of both asset managers, as UBS manages slightly larger asset base than DWS.

UBS has been considering ways to expand the asset management business as it is a constant profit generator. Further, it seeks to ensure its long-term survival and sustain competition from U.S. rivals.

On the other hand, Deutsche Bank (DE:DBKGn) cannot afford losing control over its asset management business, which has been providing stable revenues so far.

Also, CEO Christian Sewing has been more focused on bolstering retail banking and asset management segments in order to offset impact from volatile investment banking business.

In early April, rumors about both the managers being involved in serious talks over a potential merger made rounds. Though, Deutsche Bank had also approached Allianz (DE:ALVG) and Amundi over a possible deal for DWS, it found UBS to be a better option.

Also, at the time Deutsche Bank had planned to use proceeds from this merger to finance the Commerzbank (DE:CBKG) AG (OTC:CRZBY) deal.

However, merger discussions with Commerzbank ended soon as the companies figured that the deal might not reap sufficient benefits to offset the additional execution risks, restructuring costs and capital requirements associated with such a large-scale integration.

Shares of Deutsche Bank and UBS have declined 22.8% and 14.1%, respectively, over the past six months on the NYSE compared with 2.4% fall recorded by the industry.

Price Performance

Both the stocks currently carry a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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