“Deutsche Bank AG has bid between $2.5 billion and $3 billion to buy mutual-fund manager Zurich Scudder Investments from insurer Zurich Financial Services Group, according to people familiar with the matter,” writes Aaron Lucchetti in today’s Wall Street Journal.

“The bid makes Deutsche Bank, Europe’s largest bank by assets, the current favorite to acquire Zurich Scudder, ahead of Anglo-American fund manager Amvescap PLC, which has also been talking to Zurich Financial, but which is understood to be undecided about pursuing a formal bid. Even a deal between Deutsche and Zurich, if completed at all, would be complex and could take weeks to make final, these people say.”

“A Scudder sale would mark another major twist in the saga of the well-known U.S. mutual-fund firm, which was merged with Zurich’s Kemper Investments in 1997 and then renamed twice. With $345 billion in assets under management, Zurich Scudder is one of the largest U.S. fund groups, but like many of its competitors, it has been hit of late by sagging investment returns and investors’ withdrawals.”

“But Zurich’s U.S. fund operations have never fully melded as the Swiss company had hoped and, earlier this year, Zurich hired Morgan Stanley & Co. and Goldman Sachs Group Inc. to explore strategic alternatives for its money-management business. Since then, several managers have left the U.S. fund operations; Wednesday, William F. Truscott, Zurich Scudder’s chief investment officer for the Americas, announced that he was departing for American Express Co.’s financial-advisory arm.”

“While Zurich’s discussions are currently focusing on Deutsche Bank, Zurich Financial Chairman Rolf Hueppi is reluctant to accept the bank’s offer immediately, preferring to wait to see whether Amvescap, parent of the U.S.-based AIM Management and Invesco funds groups, makes a higher offer, people familiar with the matter say. While it’s unclear whether Amvescap will make a bid, it is believed to be willing to pay $2.5 billion or more, most likely in stock, for a majority stake in Zurich Scudder, which would allow Zurich Financial to follow through on its goal of keeping a stake in its fund-management unit.”

“Under the terms being discussed in a potential Deutsche-Zurich transaction, the Swiss financial giant would likely remain involved in the business in some capacity, including the possible distribution of Zurich Scudder products in Europe, according to a person familiar with the situation. Deutsche’s cash offer could also eventually include an alliance between Zurich Financial and the bank’s insurance business, Deutscher Herold. A Zurich Scudder spokeswoman declined to comment on the status of the deal talks.”