At the end of May, a group of hedge funds representing 4 percent of RHJI's share capital asked the firm to give its more than 200 million euros (170.3 million pounds) in free cash back to shareholders and abandon its bid for Deutsche Bank's (>> Deutsche Bank AG) BHF-Bank unit.

In a letter to shareholders, RHJ said it could not pull out of the BHF-Bank bid before the end of the summer without being exposed to possible compensation claims.

"The company has existing contractual commitments in respect of the BHF transaction to both Deutsche Bank, as the seller, and to our co-investors," RHJ said in the letter.

RHJI reached an agreement with Deutsche Bank on the acquisition of BHF-Bank for 384 million euros in September last year, but is still waiting for the German regulator BaFin to approve the deal.

The activist shareholder group, led by Geneva-based Equilibria Capital Management, also wants shareholders to vote to break up RHJI, citing poor share performance and an "erratic" strategy.

RHJI, a former investor in industrial companies, changed its strategy to focus on financial firms with its acquisition of Kleinwort Benson in 2009 from Commerzbank for 225 million pounds ($339.78 million).

"We always recognised that building our business during a prolonged market downturn would be difficult," it said in the letter. "Calls for a break-up of the business therefore seem unconstructive and damaging."

RHJI's biggest shareholders are the U.S.-based Franklin Equity Group, holding 15 percent, former founder Timothy Collins with 13 percent, and U.S. fund BlackRock with 9 percent. ($1 = 0.7716 euros)

(Reporting By Ben Deighton; Editing by David Brunnstrom)

Stocks treated in this article : RHJ INTERNATIONAL, Deutsche Bank AG