FRANKFURT, Germany — Shares in Allianz AG and Dresdner Bank AG rose early Monday on optimism that their $21.6 billion combination will not only create a European financial services powerhouse but also trigger corporate realignments that could streamline Germany's business landscape.
Allianz, Europe's second-biggest insurer, announced Sunday that it would buy Germany's No. 3 bank in a cash and stock deal worth nearly 24 billion euros ($21.6 billion). Allianz already owns 20 percent of Dresdner.
The takeover values Dresdner at 53.13 euros ($47.81) per share. That was nearly a 2 euro ($1.75) premium over Friday's closing price, and Dresdner shares rose to 52.40 euros ($47.16) early Monday.
Shares in Allianz initially rose 3 percent but quickly gave up most of those gains to trade up about a quarter percent at 327.74 euros ($294.96).
"It's a long-awaited deal," said Torsten Polleit, an economist with Barclays Capital in Frankfurt. "People think that the all-finance company is the future strategy for the financial services industry. This is a step in the right direction."
Buying Dresdner extends Allianz's reach from insurance products into asset management and retail banking, and follows a strategy already adopted by rivals such as Citigroup of the United States, Switzerland's Credit Suisse and Fortis of Belgium.
In Germany alone, the company will have more than 20 million customers and a market capitalization of more than 100 billion euros ($90 billion), nearly double that of Deutsche Bank, the country's largest bank, at 52 billion euros ($46.8 billion).
Standard & Poor's, the stock and bond rating company, largely applauded the deal, but placed Allianz on a credit watch late last week when talks between the two financial powerhouses were announced. It warned that Allianz's bottom line could be bruised by Dresdner, which has weaker earnings.
More importantly, however, Standard & Poor's said that the deal would be a good step toward trimming down Allianz's bloated stock holdings in other companies.
As part of its acquisition of Dresdner, Allianz will transfer its 13.6 percent stake in Germany's second-biggest bank, HypoVereinsbank, to rival insurance company Munich Re in exchange for Munich Re's 10 percent stake in Dresdner.
Rearranging those holdings opens the possibility that Germany will finally break open a decades-old tradition of corporate cross holdings that has hindered competition and sucked efficiency from the German economy.
After World War II, German banks and insurance companies often accepted shares in the country's rebuilding and cash-poor industries in return for loans. Companies such as Allianz and Dresdner have kept those holdings because the country's 50 percent capital gains tax makes it unprofitable to sell them.
The problem is that the system has tied up massive amounts of capital that economists say could be better invested elsewhere.
"It doesn't guarantee a clear line between competitor and shareholder interest," Polleit said. "A breakdown in that would be a step forward for transparency and competition in Germany."