WestLB’s majority shareholders on Thursday said they continued to favour a merger with LBBW, its public peer, which could make a sale to a commercial bank or a private equity company less likely.

The comments follow reports this week that several private investors, including Commerzbank, Germany’s second-biggest bank, and buy-out groups JC Flowers and Cerberus had expressed an interest in the Düsseldorf-based Landesbank.

The state of North-Rhine Westphalia wants to sell its minority stake in WestLB and is on Monday expected to mandate an investment bank to explore its options. It has previously said these could include a sale to private and foreign institutions.

Such a sale would be controversial, because it would go against the wishes of the bank’s majority shareholders. The two regional savings banks associations, which own the majority of the bank, Thursday repeated that they were in favour of a deal with LBBW.

“Our position has not changed. We are in favour of a combination with LBBW,” the Westfälisch-Lippische savings bank association, which owns about 25.15 per cent of WestLB, said Thursday.

The Rheinische Sparkassen und Giroverband, which also owns 25.15 per cent of the bank, also said it wanted the bank to merge with LBBW.

The savings banks associations also have the right to buy the state’s stake ahead of any third party by matching the offer.

“When we see the state’s proposal for a partner, we have to see if we can live with it,” the Westfalian association said.

A person close to WestLB’s supervisory board said it was “very unlikely” that the savings banks associations would let a private investor buy into the bank.

Some investors would be unwilling to buy a minority stake.

Klaus-Peter Müller, chief executive of Commerzbank, this week said it was “necessary that further parties agree to sell to a private investor” for a deal to happen, because the state only had a minority stake in WestLB.

The state controls about 48.7 per cent of the bank through a direct stake of 17.5 per cent and its majority holding in NRW Bank, which owns 31.2 per cent of WestLB.

Both JC Flowers and Cerberus are active in the European banking industry. JC Flowers last year became the first private operator to enter the Landesbanken sector when it bought a 27 per cent stake in HSH Nordbank, and Cerberus owns Bawag, the Austrian bank.

Some bank advisers said a sale to LBBW remained by far the most likely option, but politicians wanted to encourage competition for the stake in order to gain concessions from the bidders in the form of job guarantees at the bank and the retention of Düsseldorf as a financial centre.

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