Cerberus Takes 5% Stake in Germany's Commerzbank

Jul 27 2017 | 6:06pm ET

U.S.-based alternative investment manager Cerberus Capital Management has disclosed a €675 million stake in German banking group Commerzbank. The 5.01% stake makes Cerberus the second-largest shareholder in the bank and sets the stage for a potential clash with the German government, which owns 15.6% as a result of a crisis-era bailout. 

Private equity, hedge funds and activist strategies designed to pressure management teams into changing course or instituting shareholder-friendly elements have not typically been welcomed in Germany, whose finance industry in particular is deeply rooted in the nation’s culture and not easily penetrated by outsiders. 

That said, a spokesperson for the German Finance Ministry welcomed the news, saying Cerberus’ purchase of the position reflects rising investor interest, which is “positive for the bank and its share price” and in keeping with the government’s desire to see its stake in Commerzbank generate a good financial result for German taxpayers. 

Germany's second-largest bank has been executing on a strategic plan initiated by new CEO Martin Zielke, who joined last year, aimed at lowering costs through attrition, job cuts and elimination of the dividend – a brave move for blue chip company in a market where steady dividends remain a core incentive for many individual investors. 

Cerberus was founded in 1992 by Stephen Feinberg and William Richter. It employs a number of former U.S. government officials, including former vice president Dan Quale and former Treasury Secretary John Snow. The New York-based company has more than $30 billion under management invested across three complementary strategies: global credit opportunities (which includes non-performing loans, corporate credit & distressed debt, mortgage securities & assets, and direct lending), private equity, and real estate. 

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