Northern Trust to buy Deutsche's passive business
GERMANY- Deutsche Bank has signed an agreement to sell its passive asset management business to Northern Trust Corporation. The transaction is expected to be completed in the next three to six months, at an estimated price of $260m.
Deutsche Bank’s passive business comprises global passive equity, enhanced equity and passive fixed income, having approximately $120bn in assets under management - around 2% of Deutsche Asset Management’s revenues.
Josef Ackermann, chairman at the German bank, announced at the beginning of the year that Deutsche Bank would be disposing of its unprofitable assets and non-core businesses.
Says Tom Hughes, global head of asset management at Deutsche Bank: “ the divestiture of the passive management business is another step in the implementation of our strategy to focus on core competencies. After an in-depth strategic review, based on Deutsche Asset Management’s size and global presence, we have made the decision to concentrate our efforts on active management.”
The acquisition will increase Northern Trust’s assets under management form $327bn to $447bn, although the benefits will not be seen for the first year. William Osborn, Northern Trust’s CEO, expects that the transaction to be “very slightly dilutive to earnings in the first year and very slightly accretive to our earnings thereafter.”
DEAM’s passive business is predominantly run out of the US. The five portfolio managers in London and one in Tokyo and the remaining 25 in the US will transfer to Northern Trust.
Deutsche Bank’s global securities services business has also recently been put up for sale. State Street is currently in exclusive negotiations with the German bank to buy the custody, securities lending and fund administration units.