An advisory agreement between
and Cerberus Capital Management LP is expected to end at the end of 2019, people familiar with the matter said, terminating an unusual relationship that drew both praise and criticism.
The arrangement made New York private-equity firm Cerberus both a paid adviser to and a top shareholder in the German lender. Cerberus holds 3% of Deutsche Bank shares through an entity controlled by Cerberus’s co-founder and co-chief executive,
Deutsche Bank’s shares have shed more than half their value since the Cerberus stake was disclosed in mid-November 2017. Multiple restructurings under two CEOs in recent years have led to thousands of job cuts and scaled-back ambitions.
Cerberus, through its internal advisory arm, has worked with Deutsche Bank as a paid consultant to help it invest and price assets and manage the cash on its balance sheet, as the lender has struggled to make money.
“Cerberus Operations and Advisory Company has been a great support since mid-2018 and helped us to get our deep transformation going. Now it is all about execution,” a Deutsche Bank spokesman said on Monday.
The advisory team was led by Cerberus President Matt Zames, a former chief operating officer at JPMorgan Chase & Co. Cerberus’s advisory contract is with Deutsche Bank’s management board. Mr. Zames answered directly to Deutsche Bank Chief Executive
The two met in New York days after Mr. Sewing became CEO in April 2018, The Wall Street Journal previously reported.
“Cerberus is very supportive of the developments taking place under Christian Sewing’s leadership,” a Cerberus spokesman said. “We remain confident in his team’s ability to execute on the restructuring plan to improve the bank’s financial and operating performance.”
Both companies went into the advisory arrangement expecting Cerberus to be restricted from buying or selling Deutsche Bank shares while it was advising the bank, in adherence with securities laws, the Journal reported in 2018, citing people familiar with the consulting arrangement.
An end to the paid-advisory agreement could give Cerberus leeway to increase or decrease its stake, though there is no indication it has plans to do so. One person familiar with the contract said there could be another, ongoing phase of the relationship that might still constrain Cerberus’s trading of Deutsche Bank shares, but didn’t specify details.
Firms with access to material inside company information are generally restricted by securities laws by trading on that information.
Cerberus supported Deutsche Bank’s merger talks with German rival
this year, people close to the firms said. Those talks failed, prompting another new restructuring plan to cut billions of dollars in costs without giving up revenue
Analysts and shareholders had mixed feelings about the Deutsche Bank-Cerberus relationship, with some questioning why the bank needed to pay an outside adviser to help manage its balance sheet. Others welcomed the assistance from consultants with experience at bigger banks, saying the German bank clearly needed the assistance.
As the relationship advanced, Cerberus also ramped up its client dealings with Deutsche Bank last year. The bank helped to fund more of Cerberus’s European deals in 2018 than it had before, the Journal reported, citing deal documents and people familiar with the financing.
At the bank’s shareholder meeting in May, investors grilled executives about the Cerberus relationship. Deutsche Bank officials said Cerberus’s advice proved valuable, and both firms have said they carefully manage potential conflicts of interest.
Write to Jenny Strasburg at [email protected]
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