In a significant setback for Deutsche Bank, plaintiffs in a long-standing legal battle over the bank's acquisition of Postbank have dismissed the latest settlement offer as inadequate, heightening tensions in a case that has cast a shadow over Germany's largest lender for years. The offer, which proposed to pay shareholders €36.50 per Postbank share, has been labeled as a "lowball" by the plaintiffs' lawyer, Jan Bayer, who expressed deep dissatisfaction with the bank's approach.
The litigation, which has spanned more than a decade, centers on allegations that Deutsche Bank underpaid for its acquisition of Postbank during the late 2000s financial crisis. The bank initially sought to broaden its domestic reach and secure a stable income stream through the acquisition, but the move has since led to a barrage of legal challenges and regulatory scrutiny.
"This offer is nothing short of an insult," Bayer said in a strongly worded statement on Friday. "It's a tactic that has been months in the making, despite Deutsche Bank's previous statements to the contrary. The timing-right in the middle of the holiday season-only adds to the sense of bad faith."
Deutsche Bank's proposal comes at a critical juncture, with a hearing scheduled at the Higher Regional Court in Cologne next Wednesday. The bank's €1.6 billion offer, which is contingent upon acceptance by all claimants, is seen as a last-ditch effort to avoid a potentially damaging court ruling. However, Bayer indicated that at least one claimant had already rejected the offer, casting doubt on the likelihood of a settlement being reached before the court's decision.
The ongoing litigation has had a pronounced impact on Deutsche Bank's financial performance. In its second-quarter results, the bank reported its first net loss attributable to shareholders in four years, a loss largely driven by the €1.3 billion provision set aside for potential payouts related to the Postbank case. This provision, which has weighed heavily on the bank's balance sheet, underscores the seriousness with which Deutsche Bank is treating the claims, even as it disputes the validity of the plaintiffs' assertions.
"As we've stated in the past, we are in settlement discussions with various groups of plaintiffs within the several Postbank takeover proceedings," a Deutsche Bank spokesperson told CNBC on Friday. "We cannot comment further on the status of these talks."
The legal wrangling over Postbank has been protracted and complex. In April, a court in Cologne signaled sympathy for the plaintiffs' case, prompting Deutsche Bank to make the substantial provision in anticipation of a potential adverse ruling. This turn of events has put additional pressure on the bank, which had been enjoying a 15-quarter streak of profitability before the latest quarterly loss.
The case's origins date back to Deutsche Bank's phased acquisition of Postbank, a retail banking giant with millions of customers and deep roots in Germany's postal system. The acquisition, initially seen as a strategic move to fortify the bank's domestic operations, has instead become a legal quagmire, with hundreds of institutional and private investors claiming they were underpaid in the deal.
The litigation reached a pivotal moment in 2020 when the Higher Regional Court of Cologne dismissed all claims against Deutsche Bank. However, this decision was overturned by Germany's Federal Court of Justice in 2022, which sent the case back to the Cologne court for a fresh review. The forthcoming hearing could prove decisive, with the court potentially setting the stage for either a substantial settlement or continued litigation.
The plaintiffs, represented by Bayer Krauss Hueber, are primarily institutional investors with claims amounting to around €1 billion. These investors have been adamant that Deutsche Bank's current offer falls woefully short of what they consider fair compensation.
In a previous statement, Deutsche Bank maintained that the plaintiffs' claims were "successfully disputed" and reiterated its belief that the bank had no obligation to offer a higher price during the acquisition. However, with the court's reassessment looming, the pressure on Deutsche Bank to resolve the case amicably is intensifying.
