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DEUTSCHE-BANKERS TRUST DEAL WOULD CREATE WORLD'S LARGEST BANKING COMPANY

Germany's Deutsche Bank AG said Monday it was preparing to buy Bankers Trust Corp. for $93 a share, or about $9.2 billion in cash, creating the world's largest banking company.

The companies confirmed they were in the advanced stages of negotiations for Deutsche Bank to acquire the No. 8 U.S. banking company, which has been struggling with large losses amid stiff competition in corporate finance.

The combined banking company, which would have assets of about $850 billion, would jump to the top of the list of the world's biggest banks according to assets. The newly-merged UBS AG ranks second, with about $778 billion in assets.

The move, long-rumored in world markets, also marks the biggest acquisition of a U.S. banking company by a foreign firm and is a significant step into the United States for Deutsche, Germany's largest bank. Deutsche has often expressed its desire to make further inroads into the U.S. investment bank market.

U.S. stocks surged on the announcement, which came alongside several other large deals.

Deutsche shares rose 2.65 marks to 110.65 marks, off the day's high of 115.50 marks. Bankers Trust soared to finish up $7 at $84.50 in consolidated New York Stock Exchange trading.

"The parties have said they have done all of the due diligence," Mark Rose, an analyst at Fitch IBCA, said. "It essentially has a 99 percent chance of happening."

Based on Bankers' 99.3 million common shares outstanding at the end of the third quarter, a deal for $93 a share would be worth about $9.2 billion.

"I think it's a good deal for Bankers shareholders, compared to where the stock was selling," Ronald Mandle, an analyst at Sanford Bernstein said. "It gives more financial backing to some of their trading businesses."

The far wealthier Deutsche Bank would provide capital and a better credit standing to Bankers, which is grappling with a $488 million loss in the third quarter and recently tough conditions in the junk bond market.

But other analysts said while Deutsche bolsters Bankers' balance sheet, it will be difficult to combine a German commercial bank with the investment bank that Bankers has been trying to fashion itself into.

Bankers' securities arm, BT Alex. Brown, is also not a powerful enough investment bank to make Deutsche a threat to industry leaders such as Merrill Lynch & Co. Inc. and Morgan Stanley Dean Witter & Co., analysts said.

"The combined organization will be powerful in certain markets . . . but there will be challenges in putting together the different cultures of an investment and commercial bank, different languages," Rose said.

A merger could also add to the rising tally of layoffs on Wall Street, as the German and U.S. banking companies are likely to cut jobs in their overlapping operations.

"The price is quite acceptable at 2.4 to 2.5 times book value," Ulrich Horstmann, a banking analyst at Merck, Finck, in Germany said. "It's a favorable price but only under the condition that Bankers Trust does not suffer a wave of defections."

Bankers Trust's board of directors and Deutsche's management board both reviewed and supported the merger proposal, the banks said.

The bid now requires final approval by Bankers Trust's board and Deutsche's supervisory board, which have planned separate meetings for Nov. 29, the banks said. Deutsche said it has also scheduled meetings this week with U.S. regulators, who will also need to approve the deal.

Deutsche chief Rolf Breuer said in a statement: "I remain optimistic that all final details will be resolved satisfactorily."

Under the deal, it appears Bankers Chairman Frank Newman would co-lead the investment banking business with Deutsche's Josef Ackermann, who now heads the German bank's global corporate and institutional banking arm, one source said.

Shareholders at Bankers Trust must also approve the move. If completed, the takeover would mark the latest German advance into the United States.

In the largest industrial merger in history, Daimler-Benz AG earlier this month completed a merger with Chrysler Corp., forming DaimlerChrysler AG.

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