In spite of facing tough challenges, Deutsche Bank AG (USA) (NYSE:DB) was able to strike a deal. The bank’s investment banking division hit a big score after securing the lead advising role in financing a British American Tobacco’s (BAT) bid.
With this significant achievement, DB’s Mergers & Acquisitions (M&A) league table rating jumped up five spots on Friday. BAT has planned a $47 billion takeover of Reynolds American Inc, which is regarded as its biggest deal of the current year. The bank has told the tobacco giant it was confident that it would be able to get the needed financing commitments for the deal.
Deutsche Bank’s investors doubt its ability to survive the current storm. Tangled in a huge lawsuit and restructuring bills, the bank is struggling to implement the restructuring plan it started last year. The major legal charges are connected to the mortgage-backed securities (MBS) case of 2008 financial crises and alleged money-laundering case in Russia. With this deal, the bank is now at the fourth spot (up from ninth place) of rankings for the European mergers and acquisitions this year. On the other hand, its global ranking jumped from one place to ninth.
BAT’s current deal to buy the remaining stake in the Reynolds is the biggest deal since the Brexit vote. Previously this year, DB missed Bayer AG’s roughly $66 billion acquisition of Monsanto Co., a major setback for the bank. At that time, the bank chose to side with Bayer’s rival chemical giant, BASF SE. Currently, BASF is inactive in that industry’s M&A wave.
The bank has been advising BAT for more than ten years; it replaced JPMorgan Chase & Co. last year to become BAT’s corporate broker. The bank is currently cutting jobs and its non-core assets, in an attempt to stabilize its operations. It also needs to meet the onerous capital requirements of the European regulators; with current performance, it will become hard for it to respond to these standards.