Takeover of Hypo will proceed even if bank's major shareholder rejects it

GERMAN FINANCE minister Peer Steinbrück has said he will proceed with the nationalisation of crisis-hit lender Hypo Real Estate (HRE) even if the bank’s largest shareholder rejects his bid.

Mr Steinbrück said it was “too bad” if the consortium lead by US investor Christopher Flowers turned down the offer of €1.39 per share.

Mr Flowers, controlling 22 per cent of the stock, has rejected the state offer and has promised to sue if the federal government uses new legislation to nationalise. “If he wants to sue, that’s his prerogative,” said Mr Steinbrück, suggesting that Mr Flowers was “completely misinformed” about the bank’s prospects.

Since last autumn, Berlin has had to prop up the Munich-based bank with €102 billion in loans and guarantees after liquidity problems blamed on its Dublin-based subsidiary Depfa Bank.

The government sees state control as the best way to protect its investment in a bank which, if it collapsed, could have severe consequences for the entire financial system. Berlin says the takeover bid – offering a small premium over the legal minimum – is a fair price because, without its intervention, the bank’s shares would be worthless anyway.

The Flowers consortium rejects the price on the grounds that the share value only collapsed after Berlin began talking openly of expropriation.

HRE shareholders have until Monday to consider Berlin’s offer. To date, just 3.6 cent of the shares have been sold to the government at the price on offer.

Combined with its existing holding, Berlin now controls 12 per cent of the bank. Asked if the government would raise the price on offer to attract more sellers, Mr Steinbrück said: “I don’t want to speculate.”

Mr Flowers has called for the government to stabilise the bank by injecting fresh capital. He said he was optimistic that HRE could “become a sustainable, successful company” in the medium term.

“As long-term oriented investors, we want to accompany the company into the future,” he said.

The Flowers consortium bought a 24 per cent stake in HRE last year at €24.50 per share. Selling at the current rates would mean a loss of over €1 billion.