(updating to show contract signed, SachsenLB to receive 250 mln up front)
Dresden, Germany (Thomson Financial) - Landesbank Baden-Wuerttemberg (LBBW) has agreed to buy the hard-hit state-run Landesbank of Saxony (SachsenLB) for a price between 300-800 mln eur, announced politicians from the German states of Saxony and Baden-Wuerttemberg.
Representatives of both governments, who own the two financial institutions, signed an agreement outlying the basic elements of the sale.
Baden-Wuerttemberg Premier Guenther Oettinger said the purchase price should range between 300-800 mln eur depending on an appraisal of the bank at the end of the year.
As part of the agreement, SachsenLB will also receive 250 mln eur in immediate aid to help with liquidity impasses.
'LBBW will grow and SachsenLB will get a fair partner through the deal,' Oettinger said before a meeting of Baden-Wuerttemberg's Council of Ministers earlier today.
He said that through a far-reaching inspection of the bank, potential risks to LBBW have been limited.
According to Saxony's premier Georg Milbradt, his state should receive at least 300 mln eur from the sale.
Due to a very restrictive clause in the sale contract, the price could vary dependant on existing credit risks and exposure the bank might have.
'Baden-Wuerttemberg is not jumping into a big, black pit with this purchase,' Milbradt assured reporters.
SachsenLB, the smallest of the state-run Landesbank in Germany, needed to be provided with a 17.3 bln eur credit line by Germany's savings banks after it struggled to refinance its Ormond Quay fund because of the US sub-prime credit crisis.
Media reports have also said the bank has investments of 65 bln eur in five funds held by its Dublin-based subsidiary Sachsen LB Europe PLC, which may be in trouble.
Other reports have said that the bank's total US sub-prime credit exposure amounts to 3.0-3.5 bln eur. The bank has declined to confirm the figures.
More details about the purchase will be given at a press conference scheduled for this evening. Tyler.Sitte@thomson.com ts/gp/ts/gp/ts/gp COPYRIGHT Copyright AFX News Limited 2007. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.