Chinese Conglomerate Becomes Deutsche Bank's Biggest Shareholder --3rd Update

By William Wilkes and Jenny Strasburg

FRANKFURT -- Chinese conglomerate HNA Group has become Deutsche Bank AG's largest shareholder after increasing its stake in the German lender to almost 10%.

U.S. public filings show HNA raised its stake to 9.92% through C-Quadrat Asset Management (UK) LLP, the U.K. subsidiary of Austrian asset manager C-Quadrat Investment AG. HNA previously held a 4.76% stake in the lender, filings showed.

HNA's increased stake in Deutsche Bank makes it the lender's largest shareholder, ahead of members of Qatar's royal family and U.S. money manager BlackRock Inc., according to public filings.

HNA holds the shares through a special-purpose company managed by C-Quadrat, which also holds the voting rights for HNA's Deutsche Bank stake.

Deutsche Bank, HNA and C-Quadrat declined to comment.

In February, the German bank said, in response to news HNA had become a major shareholder, that it "welcomed in principle any investor with a long-term view."

HNA, through C-Quadrat, had signaled it was looking to increase its stake, but not above 10%. Intentions to exceed that threshold would trigger additional reporting requirements, and crossing the 10% ownership line would require German regulatory approval, lawyers and analysts say.

Analysts say U.S. regulators also would scrutinize any potential move by a single shareholder, including HNA, to amass a 10% or greater stake in a financial firm like Deutsche Bank that has big trading and investment-banking businesses in the U.S.

In March, Deutsche Bank said C-Quadrat's founder and chief executive, Alexander Schütz, was nominated to join the lender's supervisory board, ahead of the annual meeting scheduled for May 18. His appointment would give the managers of HNA's stake sway over high-level decision-making and oversight of Deutsche Bank management.

The German lender's shares have rebounded after hitting multiyear lows last fall because of fears about its capital position. Deutsche's recent earnings statements show its main businesses are stabilizing after a tumultuous 2016, when fears of big regulatory fines unnerved clients and investors. Investors still harbor uncertainties about its ability to meet profit and cost-cutting targets.

At Tuesday's closing price, HNA's 204.7 million-share stake was worth about EUR3.4 billion ($3.7 billion).

Based in China's Hainan province, HNA Group began as an airline operator before expanding into hotels, tourism, logistics, real estate and finance. HNA's most high-profile acquisitions have been U.S.-based companies. The firm last year took a roughly 25% stake in hotelier Hilton Worldwide Holdings Inc.

HNA gained attention this year for investing abroad despite strict capital controls in China. The group's executives have said the group largely finances takeovers through offshore cash flow, so it doesn't have to move cash out of China to continue its shopping spree.

"Everyone is passionate, full of hormones, dying to achieve things." Gao Jian, the group's chief operating officer has said of HNA's acquisitions strategy.

The group in late March made an indicative bid for HSH Nordbank AG, a state-owned German bank struggling with billions in soured shipping loans.

Deutsche Bank last month completed an $8.5 billion capital increase in which HNA Group and other shareholders participated, people close to the matter said at the time. The fundraising, Deutsche Bank's third since 2013, aimed to soothe concerns about the strength of the bank's capital buffers.

--Kane Wu contributed to this article.

Write to Jenny Strasburg at jenny.strasburg@wsj.com

(END) Dow Jones Newswires

May 03, 2017 13:31 ET (17:31 GMT)

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