(Reuters) -Deutsche Bank said on Friday it had agreed to buy Numis Corp, a London-based boutique investment bank, for about 410 million pounds ($511 million) as the German company deepens links with British corporate clients.
The surprise acquisition is Deutsche's largest in more than a decade and marks a rare move for its global investment bank, which has been looking for targeted expansion after years of retrenchment as Germany's top lender sought to recuperate from losses.
The announcement comes in the wake of Deutsche posting an 11th consecutive quarter of profit but also news of 800 back-office job cuts.
Fabrizio Campelli, who oversees Deutsche's investment bank, said it had been looking to grow its business in Britain and "Numis represents a compelling strategic fit".
Analysts at JPMorgan (NYSE:JPM) criticised the move. "The deal is not aligned with what shareholders want to see more of - retail-type stable earnings, more cost focus...and capital return."
Deutsche Bank (ETR:DBKGn) shares were up 1.5% in late afternoon trade, while those of Numis rose 67%. The 350 pence-per-share, all-cash offer represents a premium of 72% to its Thursday close.
The transaction brings Deutsche back into equities, an important business for Numis in Britain albeit on a small scale.
In 2019, Deutsche Bank retreated from its global equities sales and trading business in a radical overhaul to shore up the bank, only keeping research and equities capital markets.
"Strategically we are surprised", said Anke Reingen, a London-based analyst at RBC.
James von Moltke, Deutsche Bank's chief financial officer, said that the acquisition was not a u-turn in strategy, but a move to expand its business ties with corporates clients.
"I hope it won't be interpreted as a u-turn," he told analysts. "It shouldn't, but we understand at first glance that it might look that way."
Deutsche Bank said earlier this week its strategy includes accelerating "growth initiatives" including potential acquisitions of portfolios and assets.
MOVING IN
As part of the deal which is expected to close by the end of the year, 35 Deutsche Bank staff will join more than 300 London-based Numis staff. Numis will continue to be overseen by its co-CEOs, and will operate under both company names.
Numis makes the bulk of its revenue in the United Kingdom and has a small presence in the United States. About 65% of its income in 2022 came from investment banking, and the rest from equities.
Numis's equities trading and sales operations in Britain will be left largely unchanged after the integration, a person with knowledge of the matter told Reuters.
Numis recommended the offer, which comprises 339 pence in cash, an interim dividend of 6 pence per Numis share for the six months ended March 2023 and an additional interim dividend of 5 pence per share.
($1 = 0.8021 pounds)