Dutch government sells part of ABN Amro to Deutsche Bank

The Dutch finance ministry and German Deutsche Bank have agreed on the sale of 13 branches of ABN Amro and of its subsidiary HBU.

By agreeing to sell off parts of ABN Amro the Netherlands is complying with a condition set by EU anti-trust Commissioner Neelie Kroes when Fortis bought the Dutch part of ABN Amro in a 2007 take-over. The deal clears the way for the state to merge the two banks, which were nationalised a year ago.

The pact, which is not final and depends on negotiations and a host of regulatory approvals, is the same in terms of assets as the deal Deutsche agreed with Fortis in July 2008.

The acquisitive German lender will boost its Dutch operations by acquiring commercial bank HBU, 13 advisory branches, two corporate client units and a factoring business. The assets specialise in credit for small and midscale businesses.

The Dutch finance minstry found the initial guarantees given to Deutsche for a set of mortgages too high and reopened the negotiations. Those failed last July. Finance minister Wouter Bos said it was his responsibility to the tax payers to make sure the assets were not sold too cheap, but he faced a veto from Kroes on merging the two banks as long as the deal didn't go through.

Bos wrote to parliament that details about the deal cannot be disclosed, but sources say Deutsche Bank is to pay 690 million euros for the assets and the risk of the controversial mortgage portfolio will be split between buyer and seller. Deutsche said the acquisitions will make it the fourth-largest provider of corporate and investment banking services in the Netherlands.

The merger of ABN Amro and Fortis, followed by an eventual IPO, is core to the Dutch state's exit strategy for the nationalised banks. With the outlines of a deal in place, ABN Amro can now concentrate on its legal separation from the Royal Bank of Scotland, which was also one of the consortium members and which legally owns certain units still housed within the bank.

ABN Amro recently postponed the demerger and separation - a complicated two-step process that involves creating new operating and holding companies - to at least the first quarter of 2010. Once that is complete, it expects to operate as a stand-alone banking company through at least the first half of 2010, while Fortis Bank Nederland completes its own disentanglement from the BNP Paribas-owned Fortis Bank and from Fortis Holding.