JC Flowers wins deal for German bank

The US private equity firm has been approved to lead a group in buying WestLB’s 24% stake in HSH Nordbank for €1.25bn. The private equity group will share ownership of the Landesbank with two German municipalities.

German bank WestLB today announced that JC Flowers & Co. has prevailed in an auction to buy a roughly 24.1 percent stake in HSH Nordbank, one of several banks owned by regional German governments.

The deal, valued at €1.25 billion ($1.6 billion) marks the first time that a financial buyer has acquired a stake in a German Landesbank, or state-run bank.

Other bidders for the stake reportedly included private equity firms Hellman & Friedman and Cerberus Capital Management.

A press release from WestLB stated that JC Flowers, run by J. Christopher Flowers, was advising “five groups of institutional investors acting independently of one another” in the acquisition. The release did not identify these groups.

According to a Dow Jones report, JC Flowers has teamed with Corsair on the deal.

The more than 24.1 percent stake gives the JC Flowers group 26.6 percent voting rights in the bank. On a voting rights basis, HSH Nordbank, based in Hamburg and Kiel, is 35.38 percent owned by the City of Hamburg, 20.02 percent owned by the State of Schleswig-Holstein, and 18.02 percent owned by the Savings Banks Association of Schleswig-Holstein.

The bank was created in 2003 through a merger between Hamburgische Landesbank and Landesbank Schleswig-Holstein. It has total assets of roughly €165 billion and 4,500 employees.

HSH Nordbank’s main focus is on real estate and transportation and shipping finance in Northern Europe.

The deal is being closely watched by advocates for, and opponents of, the greater privatisation of other Landesbanks. Landesbank Berlin is being prepared for a similar transaction.

In a statement, Dr. Thomas Fischer, chairman of WestLB, said: “[T]hrough the investors which JC Flowers has advised, we have found institutions which, in our judgment, largely share the strategic vision of the other shareholders and management of HSH Nordbank. Our decision in favour of these investors is one we have reached after carefully weighing it up against all relevant criteria.”

HS Nordbank chief executive Alexander Stuhlmann has said the bank may pursue an initial public offering as early as the end of 2007, according to reports.

JC Flowers, based in New York, is currently in the market with a fund that is targeting roughly $6 billion, according to market sources. Flowers himself has committed $200 million to the vehicle.

Flowers gained a name for himself first as a financial services expert at Goldman Sachs and then as one of the architects of the incredibly successful buyout and rejuvenation of Shinsei Bank in Japan, a deal he did in conjunction with Ripplewood Holdings.

Last year, JC Flowers led the acquisition of Dutch merchant bank NIB Capital from pensions ABP and PGGM for €2.1 billion.