Market gives positive responseto Postbank share price cut

21 June 2004

BERLIN – Despite the false start to Postbank’s stock exchange debut, Germany’s financial markets have given a positive response to moves by the retail bank’s parent company, Deutsche Post AG, to revamp the share listing and to cut the issue price by 10 percent.

Deutsche Post was forced on the weekend to bow to analysts’ criticism of the planned stock market listing of its Postbank offshoot by announcing it was slashing the share issue price, delaying the listing by two days and cutting the number of shares to be sold.

Shares in Deutsche Post – which is the German postal service and owns express mail delivery service, DHL – rose as much as four percent to EUR 17.38 in trading Monday with Postbank shares trading at about EUR 30 on the so-called grey market.

This places Postbank stock within the new price range for shares in Germany’s biggest retail bank of between EUR 28 and EUR 32, which Deutsche Post unveiled on the weekend.

“That the Postbank stock exchange comes after all has resulted in a certain amount of relief on the market,” said Raed Mustafa, analyst with the Baden-Württembergischen Bank in Stuttgart.

Billed as one of Europe’s largest initial public offerings (IPOs) this year, Postbank’s stock market debut was to have taken place Monday with Deutsche Post having announced earlier this month a price range for the issue of between EUR 31.50 and EUR 36.50.

But with analysts having insisted that the price should be closer to EUR 30 or even less and after a less than encouraging response from investors, Deutsche Post said it was cutting the price range for the shares and postponing the flotation until Wednesday.

While institutional investors now have until Tuesday 4 p.m. Central European Time to sign up to the share offering, smaller retail investors have until noon.

Having acknowledged what he described as market signals, Deutsche Post chief Klaus Zumwinkel said Sunday that by cutting the price and the number of shares on offer the group has saved Postbank’s market debut.

“It was a difficult poker game with big investors worldwide,” he said, adding: “We will cross the finish line. We are going to successfully carry out the IPO.”

After a drought of two years, only two companies have so far this year dared to mount public offerings in Germany with three companies pulling out of their listings and postponing them until later in the year in the hope of more favourable market conditions.

Indeed, the Postbank launch is the biggest German IPO since Deutsche Post’s own stock mark listing in November 2000 with the sell off of a stake in the bank supposed to give fresh momentum to Europe’s IPO business and to breathe new life into Germany’s dormant share-buying culture which has suffered in recent years as a result of global equity markets turbulence.

Apart from delaying the launch until Wednesday to give investors an extra two days to sign up, Deutsche Post said that only two-thirds of the 49.9 percent stake it had originally planned to sell off would go up for sale generating about EUR 2.6 billion in funds for the group.

With the German government still holding a 63 percent stake in Deutsche Post, the Bonn-based postal group had been keen to marshal the funds raised from the issue as a way of reducing debt and finance its European expansion.

Deutsche Post plans to make up for the shortfall in funds it had hoped to raise from the listing by issuing a one billion euro convertible bond that can be exchanged for Postbank shares which Zumwinkel said would help to enlarge the circle of investors for the group.

The group is looking into whether it is possible for private investors to buy a piece of the bond.

Deutsche Post will continue to hold 82 million plus one shares, giving it majority control of the bank, which has 11.5 million customers and offers its services through 9,000 post offices across Germany.

However, the decision by Deutsche Post to lower the issue price represents a considerable climb down by the group with Zumwinkel and Postbank boss Wulf von Schimmelmann both having insisted for the last few weeks that there were no plans to alter the planned issue.

But then Postbank has enjoyed anything about a smooth ride to the stock market with the listing hit by a series of mishaps, which have helped to fuel speculation that it may have had to be abandoned.

At one point, Deutsche Post was reported to be considering taking legal action against the offering’s lead investment bank, Deutsche Bank, after the leak of an internal Deutsche Bank document, which claimed that Postbank was worth up to 25 percent less than the price tag Deutsche Post had placed on the bank.

While Zumwinkel had insisted that he wanted the Postbank IPO to reach EUR six billion or EUR 36.6 a share, according to the leaked document Deutsche Bank valued Postbank at between EUR 4.4 billion and EUR 5.3 billion.

Last month Deutsche Post was also forced to consider dropping the listing after it emerged that Deutsche Bank, which is Germany’s biggest bank, was sizing up Postbank as a takeover target.

DPA

Subject: German news