Deutsche Bank Plans To Divest Maher Terminals Unit
In what comes as the latest step by Deutsche Bank (NYSE:DB) towards cutting down its non-core operations, the bank has kicked off a search for potential buyers for its Maher Terminals unit. [1] The German banking group took control of the two cargo-container facilities at the Port of Prince Rupert in Canada and at Port Elizabeth in New Jersey in 2007 and has lost more than $1.5 billion on the venture since. Deutsche Bank moved the unit under its Non-Core Operating Units (NCOU) division in Q4 2012, and is reportedly exploring options including a complete sale, a partial stake sale, as well as the sale of just one of the terminals in the near future.
Deutsche Bank has stepped up the sale of its non-core operations over the recent months, with the bank announcing an exit from its stake in BHF-Bank in March followed by its sale of the Cosmopolitan of Las Vegas in May (see Deutsche Bank Finally Sells Cosmopolitan For $1.73 Billion). ((Deutsche Bank completes sale of BHF-BANK, Deutsche Bank Press Releases, Mar 27 2014)) The three largest investments held by Deutsche Bank under its Non-Core Operating Units (NCOU) division at the end of 2013 were Maher, Cosmopolitan of Las Vegas and BHF-Bank, and the bank seems keen to get all three of them off its books by the end of the year.
We maintain a $44 price estimate for Deutsche Bank’s stock which is roughly 20% ahead of its current market price. The bulk of the price difference can be attributed to weak sentiments among investors for European investment banks in the wake of New York state’s recent lawsuit accusing Barclays (NYSE:BCS) of improper practices in its dark pool trading unit.
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Deutsche Bank’s organization-wide restructuring plan, dubbed Strategy 2015+, focuses considerably on cutting costs. The disposal of non-core assets housed under the group’s Non-Core Operations Units (NCOU) plays an important role in this cost-cutting plan. With the bank tackling the BHK-Bank and Cosmopolitan of Las Vegas sales over the last three months, it was only natural for it to turn its attention to the loss-making Maher Terminals unit.
Deutsche Bank acquired Maher Terminals in early 2007 for roughly $2.3 billion, with a little more than half that amount funded as a loan by the bank. [2] The economic downturn hit the operations soon after that, forcing the bank to write off the $1.1 billion in equity since then. The bank also ended up restructuring the debt component for an additional loss of €314 million ($427 million), losing $1.5 billion in all in the deal. [1] As a part of Strategy 2015+, Deutsche Bank moved the unit from its alternative asset management division, RREEF, to the newly created NCOU division and is now taking the next step towards its disposal.
The sale of Maher Terminals is expected to bring Deutsche Bank between $800 million to $1 billion. Besides helping the bank strengthen its capital ratio figures, a sale will mark the bank’s exit from the largest units that made up NCOU at the end of 2013.
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Notes:- Deutsche Bank Seeks Buyers for All or Part of Maher Terminals, The Wall Street Journal, Jun 26 2014 [↩] [↩]
- German Bank Agrees to Buy U.S. Terminal, The Wall Street Journal, Mar 2007 [↩]