SEC Form 20-F - Deutsche Bank Annual Report 2012

Deutsche Bank Notes to the Consolidated Financial Statements F-51
Annual Report 2010 on Form 20-F 04 – Acquisitions and Dispositions
Deutsche Bank announced on November 30, 2010 that it had sold 0.5 million Postbank shares and on
December 3, 2010 that it had sold a further 3.9 million Postbank shares both to a third party for a consideration
of € 23.96 and € 21.75 per Postbank share, respectively. The sale, which was intended to avoid a delayed
completion of the PTO that would have resulted from U.S. merger control proceedings, led to an intermediate
legal shareholding of less than 50 % in Postbank. Along with the sale, Deutsche Bank concluded forward
purchase contracts corresponding to the aforementioned number of Postbank shares with this third party for a
cash consideration of € 23.96 and € 21.75 per Postbank share, respectively, plus a transaction fee of approximately
€ 0.03 and € 0.015 per share, respectively. The forward purchase contracts settled on December 10, 2010,
following satisfaction of U.S. antitrust review and bank regulatory approval requirements. As a result, the Group
increased its shareholding in Postbank to 51.98 % (equal to 113.7 million Postbank shares), the ultimate level
achieved through the PTO. Although the shares had been legally sold to a third party, the Group retained the
risks and rewards of those shares. It was deemed to be virtually certain that U.S. antitrust approval would be
obtained so that the potential voting rights from those shares were included in the consolidation analysis for
financial reporting purposes. Accordingly, the date of acquisition of the Postbank Group was determined as
December 3, 2010.
Capital Increase of Deutsche Bank. In close coordination with the PTO, Deutsche Bank also implemented a
capital increase from authorized capital against cash contributions. The capital increase was completed on
October 6, 2010. In total, 308.6 million new registered no-par value shares (common shares) were issued,
resulting in gross proceeds of € 10.2 billion. The net proceeds of € 10.1 billion raised from the issuance (after
expenses of about € 0.1 billion net of tax) are primarily intended to cover the capital consumption from the consolidation
of the Postbank Group, and, in addition, to support the existing capital base. Please refer to Note 31
“Common Shares” for additional information on the capital increase.
Treatment of the Group’s equity investment and other financial instruments on Postbank held at the closing date.
Prior to obtaining control, the Group directly held 29.95 % of the shares and voting rights of Postbank, giving it
the ability to significantly influence Postbank’s financial and operating policies. Accordingly, this investment was
accounted for using the equity method.
In addition, the Group had subscribed to a mandatory exchangeable bond (“MEB”) issued by Deutsche Post. The
MEB was acquired by Deutsche Bank in February 2009 as part of a wider acquisition agreement with Deutsche
Post regarding Postbank shares. According to the acquisition agreement, the MEB will be fully exchanged in
2012 for 60 million Postbank shares, or a 27.42 % stake. For accounting purposes, the MEB constitutes an
equity investment which has risk and reward characteristics substantially similar to an ownership interest in the
Postbank shares and therefore was included as part of the equity method investment. Upon recognition of the
MEB, the equity method investment also contained an embedded derivative related to a profit sharing agreement
with Deutsche Post on Deutsche Bank shares issued which were received as consideration by Deutsche Post.
The embedded derivative was bifurcated as the risks and rewards from the profit sharing were not clearly and
closely related to the host contract. The initial fair value of the embedded derivative was € 201 million which
reduced the cost of the equity method investment in Postbank. Subsequent changes in the fair value of the
options were reflected in profit or loss. The final value of the receivable arising from the embedded derivative,
which is no longer remeasured since Deutsche Post sold all Deutsche Bank shares received as consideration
for the initial acquisition of 50 million Postbank shares, amounted to € 677 million. The receivable is reported
separately in other assets and will offset with the corresponding collateral received (liability) once the MEB
matures, at which time both items will offset against each other.