Deutsche Bank left with 7 percent of Merlin as secondary sales struggle

By Freya Berry

LONDON (Reuters) - Deutsche Bank (DBKGn.DE) has been left holding a near 300 million-pound stake in a British theme park operator after failing to unload shares acquired for a placement, the latest example of a bank retaining a block of stock it had been hired to sell.

The bank had been brought in this week by private equity funds CVC [CVC.UL] and Blackstone (BX.N) to sell 15.44 percent of shares in Merlin (MERL.L), operator of attractions such as Legoland, but a regulatory statement on Friday showed it still had at least 7 percent of the company.

Deutsche Bank declined to comment.

Secondary sales involve a bank helping a shareholder dispose of an unwanted stake and mean the bank takes on the risk of not being able to shift all the shares in question.

Such deals usually do not bring fees and are often done to boost a bank's position in investment banking league tables, whose positions confer important bragging rights in the cut-throat sector. But holding a valuable chunk of shares can be problematic, even if they can be trickled into the market without resulting in a loss.

"It's the worst part of investment banking," a London-based ECM banker said. "It is not what shareholders (of a bank) expect them to be doing with equity capital."

Deutsche Bank has been involved in five placements this week, helping boost its European position to fourth as of Friday from sixth as of Feb. 27, according to Thomson Reuters data. It was not clear how many of these deals had been fully placed since market rules mean a shareholder only has to disclose a stake above a certain level.

Deutsche also declined comment on these deals.

Earlier this week, UBS (UBSG.VX) was forced to take on a portion of Abertis (ABE.MC), following a 1.1 billion-euro ($1.2 billion) sale by CVC of 7.5 percent of the company. UBS earlier declined to comment on the Abertis sale.

In 2013 Barclays (BARC.L) ended up with a 14.2 percent stake in Dutch cable TV operator Ziggo worth around 697 million euros. Eventually Liberty Global (LBTYA.O) purchased the stake.

Some leading banks have pushed for such deals not to be included in league tables. Other bankers see so-called agency deals as the way forward, as two such deals, involving Ontex (ONTEX.BR) and Akbank (AKBNK.IS), ran successfully this week.

In agency deals, bankers call investors directly to ask what price they think is fair, as opposed to running an auction where banks compete to offer the seller the best price before plugging the stock to investors.

(Editing by Pamela Barbaglia and David Holmes)