Business Combinations completed in 2013

On September 2, 2013, Deutsche Bank AG announced that it completed the purchase of the remaining 51 % of the shares in its joint venture Xchanging etb GmbH (“Xetb”), which is the holding company of Xchanging Transaction Bank GmbH (“XTB”). The preliminary purchase price paid for the step-acquisition amounted to € 36 million and was fully paid for in cash. It consists of a base component of € 41 million, subject to certain adjustments, which resulted in an initial purchase price reduction of € 5 million as of December 31, 2013. The purchase price is expected to be finalized in the first quarter 2014. The agreement between Deutsche Bank and the seller, Xchanging plc. (“Xchanging”), was signed in May 2013. As the required approvals have been obtained, including those from regulatory authorities and the shareholders of Xchanging, the change of control to Deutsche Bank became effective on September 1, 2013 (the acquisition date). On closing the transaction, Deutsche Bank gained full ownership and operating control over XTB. The transaction is intended to contribute to Deutsche Bank’s Strategy 2015+ to improve operating efficiency and to reduce process duplication, complexity and costs.

Xetb was established as a joint venture with Xchanging in 2004 and is the holding company of XTB, the Group’s former wholly-owned subsidiary european transaction bank ag (“etb”). XTB provides services in relation to the securities processing business for Deutsche Bank as well as for external clients. The acquired entities were integrated into Deutsche Bank’s infrastructure operations. Prior to obtaining control over XTB, the Group directly held 49 % of the shares in Xetb, giving it the ability to significantly influence the investee’s financial and operating policies. Accordingly and up until closing date, XetB, including its subsidiary XTB, had been accounted for using the equity method. The acquisition-date fair value of the equity interest in the acquiree amounted to € 21 million. The remeasurement to fair value did not result in any gain or loss.

As of reporting date, the acquisition accounting for the business combination has not yet been completed. Accordingly, the opening balance sheet is still subject to finalization. In addition, the determination of the total consideration and its allocation to assets acquired and liabilities assumed has not yet been concluded. As of December 31, 2013, the preliminary amount of goodwill originating from the transaction amounted to € 37 million and is based on the synergies expected from inhousing the securities settlement business. The goodwill, which is not deductible for tax purposes, has been allocated to PBC (€ 24 million), GTB (€ 6 million), CB&S (€ 5 million) and DeAWM (€ 2 million).

Fair Value of Assets Acquired and Liabilities Assumed as of the Acquisition Date

in € m.

 

1

By major class of assets acquired and liabilities assumed.

Cash consideration transferred

36

Fair value of pre-existing stakes

21

Deduction for settlement of pre-existing relationship

8

Total purchase consideration, including fair value of the Group’s equity interest held before the business combination

49

 

 

Recognized amounts of identifiable assets acquired and liabilities assumed:1

 

Cash and cash equivalents

6

Financial assets available for sale

24

Intangible assets

6

All other assets

31

Provisions

22

All other liabilities

34

Total identifiable net assets

12

Goodwill

37

Total identifiable net assets and goodwill acquired

49

Prior to the acquisition, Deutsche Bank and XTB were parties in a joint service contract arrangement for the provision of securities processing services to Deutsche Bank. The service arrangement has been identified as a pre-existing relationship, which is accounted for separately from the aforementioned purchase transaction. The service contract, which would have expired in May 2016, was terminated in connection with the closing of the transaction. The settlement amount attributable to the service contract was determined using a discounted cash flow approach. Its recognition resulted in a loss of € 8 million, which was recorded in general and administrative expenses in the Group’s income statement for 2013.

As of December 31, 2013, acquisition-related costs borne by the Group amounted to € 1 million, which were recorded in general and administrative expenses in the Group’s income statement.

Following its consolidation on September 1, 2013, XTB contributed net revenues and a net income (loss) after tax of € 4 million and € (29) million, respectively, to the Group’s income statement for 2013. If consolidation had been effective as of January 1, 2013, XTB’s pro forma contribution to the Group’s net revenues and net income (loss) after tax for 2013 would have been € 14 million and € (83) million, respectively. These results should be seen in conjunction with XTB’s core business in which it is providing significant service volumes to the Group.