When a merger of the magnitude of Bankers Trust Corp. with Deutsche Bank is announced, it is ordinarily taken for granted that the deal will get done.
But on Wall Street there appears to be considerable doubt about this $10.1 billion multinational combination.
At the close of trading Tuesday, Bankers Trust's share price was $84.625, 9.1% less than Deutsche Bank's $93 cash offer of Nov. 30-a spread that analysts consider unusually wide.
"It has been a long time since we've had a controversial bank merger," said Lawrence W. Cohn, a banking analyst at Ryan, Beck & Co. "I'm not sure if this one is controversial or not, but there are enough questions that arbitragers are shunning the company."
From the start investors have wondered whether U.S. regulators might delay the merger in deference to pending lawsuits challenging Deutsche Bank's dealings with the Nazi regime in Germany.
There are also questions about how much it will cost Deutsche Bank, despite its status as one of the world's largest financial institutions, to raise $10 billion during a period of uncertainty in capital markets. Bankers Trust's own exposure to these tempestuous markets also comes to the fore.
Ordinarily, shares of the target company in a planned merger will approach the offer price, and the difference between the two narrows over time, reflecting investor confidence that the transaction will be completed.
But the gap between Bankers Trust's stock price and Deutsche Bank's offer has widened from 6.5% on the announcement date.
Wall Street concern appears tied to the fact that the expected closing is months away.
Bankers Trust officials, who declined to comment for this article, have said they expect to complete the merger in May.
But given the New York company's recent history and its exposure to many of the world's most volatile markets, skeptical takeover traders say six months is enough time for Bankers Trust to lose millions of dollars and jeopardize the deal, despite Deutsche Bank's assurances that the deal will go through.
"This company has blown up before, and there is plenty of time for it to blow again before the deal closes," said one arbitrager. "You never can know what's going on in their derivatives desk until something bad happens. And what is this stock worth without the deal? $50? $60?"
Regulatory approval could also be a stickier process than in many bank combinations.
Federal and New York State officials are expected to hold public hearings before acting on the merger, and questions are sure to be raised about Deutsche Bank's role as a financier of Adolph Hitler's Germany.
Such testimony could cause state regulators to slow their approval, said David S. Berry, director of research at Keefe, Bruyette & Woods Inc.
With unanswered questions abounding, takeover traders say they are looking for arbitrage opportunities in mergers involving companies less volatile than Bankers Trust.
Just six months ago, on April 22, Bankers Trust's stock price peaked at $136.3125. It plummeted to a low of $49.1875 Oct. 7, two weeks before the company reported a $488 million third-quarter loss.
The fourth quarter is unlikely to be a repeat of that disaster, but Mr. Berry said he does not expect it to be very good, either. Except for Chase Manhattan Corp., most internationally oriented banks "are having a tough time of it right now," Mr. Berry said.
In underwriting, at least, Bankers Trust's fourth-quarter revenues appear to be substantially off the pace set last year-and even last quarter. Through Monday, proceeds from debt and equity offerings were $1.25 billion, compared with $2.31 billion for the entire fourth quarter last year and $2.25 billion in the third quarter, according to Securities Data Co.
Mr. Berry said Bankers Trust might be to able squeeze out a profit if it delays some restructuring charges it announced in October. It might also decide not to write off some nonperforming emerging-market swap agreements.
The company could well elect to postpone these charges and writeoffs, Mr. Berry noted, because its business plans have changed greatly since the October announcement.
For now, the surest thing about the merger seems to be Deutsche Bank's ability to pay for it. Through a series of complex financing arrangements, the Frankfurt-based institution has raised about 25% of the needed cash, analysts say, and despite continued turmoil in the capital markets, they expect it will come up with the rest easily.
If all the merger hurdles are cleared, one of the biggest remaining questions would be whether Deutsche Bank will retire the brand names of Bankers Trust and Alex. Brown, the investment bank that BT bought last year and whose name has cachet among technology investors.
That is no longer a major issue for Mr. Cohn of Ryan Beck.
"Bankers Trust's stock is slowly drifting off the radar screen," he said. "Most of us have put it behind us, and I guess arbitragers have as well."