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Close Bros drops out of Kleinwort race

Source: Reuters - Tue 29th Sep 2009

British merchant bank Close Brothers has dropped out of the bidding for Kleinwort Benson, the private banking unit being sold by Commerzbank, three sources familiar with the situation said.

Banking sources said the further reduction in the list of potential suitors now makes a management buyout of the unit - which newspapers say would include former chairman Simon Robertson - the most likely outcome.

Germany's Commerzbank put Kleinwort Benson on the block earlier this year as part of European Union requirements for approving billions of euros in German government support.

Back in May, a source close to Kleinwort put a book value of around 300 million pounds on the unit. A banking source on Tuesday said that a deal was now likely to be done closer to 200 million, while a second banking source suggested it could be even below that.

Close Brothers was named as a potential buyer this summer, when a source familiar with the matter told Reuters that Close was in the second round of the auction process.

Close Brothers Chief Executive Preben Prebensen said on Tuesday that the bank did not comment on specific deals and declined to confirm the bank had pulled out of the race.

"We look at a lot of things, and we reject the great majority" he told Reuters.


Other potential buyers named by newspapers during the sale process include SG Hambros, part of Societe Generale's private banking arm, but it is unclear whether they are still in the running.

SG Hambros were not immediately available for comment. Commerzbank and Kleinwort Benson declined to comment.

A person close to Kleinwort Benson said in May that management was keen to take the lead in either finding a viable MBO or a trade buyer who will keep the franchise - hoping to counter a potential deal that may be lucrative to Commerzbank but fails to hold on to the franchise.

Robertson, who is reported to be backing the MBO option along with former HSBC Chairman John Bond, was at Kleinwort during its 1980s heyday, when the bank acted on many of the Thatcher government's privatisations.

Sources familiar with the matter on Tuesday said that a tough financing environment was holding back a deal that had been expected to be done by the third quarter.

"There is very little leverage available for buyouts from banks so they have had to look elsewhere for financing" one of the banking sources said.

Kleinwort Benson has said it has been reassured by Commerzbank that there would be no "firesale" with the timeline provided by the European Commission allowing for a two-and-a-half year period to prepare for the divestment.

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