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Italy’s Unicredit is facing stiff opposition from the German government amid speculation that it may launch a multibillion-euro takeover bid for Frankfurt-based Commerzbank.
On 11 September, Unicredit announced that it had purchased a nine per cent stake in Commerzbank, Germany’s second-largest lender.
It purchased half of the stake in the open market and the other half from the German government, which had unveiled plans the previous week to sell down its 16.5 per cent stake, originally acquired during the financial crisis.
Unicredit’s move was widely seen as the first step towards a takeover bid.
On Monday, Unicredit claimed that it had upped its holding to 21 per cent, subject to regulatory approval. This would make it Commerzbank’s largest shareholder, overtaking Berlin.
The Milan-based lender also confirmed that it had applied for European Central Bank approval to increase its Commerzbank holding to just below 30 per cent. Passing that threshold would trigger a mandatory buyout offer under German law.
Germany still owns 12 per cent of Commerzbank and has refused to accept a foreign takeover.
Could this kickstart a much-anticipated wave of eurozone bank mergers?
The great dealmaker
Unicredit’s swoop for Commerzbank, which has around a third of its market capitalisation, has been years in the making.
In 2018, France’s BNP Paribas and Dutch bank ING Group reportedly made informal approaches to Berlin to acquire the German government’s stake.
Unicredit executives first approached the government about a potential merger with the 154-year-old lender as early as 2017.
However, the arrival of Andrea Orcel as Unicredit’s chief executive dialled up expectations for a more aggressive approach.
The 61-year-old, known for his hardcore management style and once dubbed the “Ronaldo of investment banking”, has long been considered a key player in driving more consolidation in Europe’s crowded banking sector.
He joined Unicredit, Italy’s second-largest bank, in 2021 and has overseen a boom in the company’s profits and stock price.
Although Orcel’s move came as a surprise this month, Commerzbank is considered a logical takeover target for Unicredit, which has a large German subsidiary called Hypovereinsbank.
Underscoring his deftness, Orcel used derivative instruments to increase Unicredit’s holding even after the German government shelved plans to put its remaining 12 per cent stake up for sale.
Unicredit’s investors seem to be on board with his approach. Shares in the bank have jumped 8.7 per cent since Orcel’s initial move. Commerzbank’s stock has also gained 28 per cent.
Orcel said on Wednesday that taking a stake in Commerzbank was “an investment, nothing else” and that he wanted to engage in talks with Berlin.
Germany on the offensive
“Unfriendly attacks [and] hostile takeovers are not a good thing for banks, and that is why the German government has clearly positioned itself,” German Chancellor Olaf Scholz said earlier this week.
Scholz is not alone in his criticism. German politicians across the board have slammed Orcel for using aggressive tactics.
Berlin remains Commerzbank’s biggest shareholder and could block the lender by demanding it keep its German listing. The country’s influential unions may also resist any job cuts planned by Unicredit.
Still, the ECB’s 26 policymakers—not Berlin—will have the final say on whether any deal can proceed.
Some ECB officials are reportedly concerned over a potential merger.
Still, six of its policymakers told Reuters they were broadly supportive of a tie-up and viewed Berlin’s opposition as running against the principle of European integration that supervisors have long called for.
It is unlikely that the ECB will reject Unicredit’s application to take its stake over 10 per cent.
The regulator has 60 days to make a decision but can add 30 extra days for complex cases.
What next?
In her first public comments as Commerzbank’s new CEO-designate, Bettina Orlopp said on Thursday that she would meet with Unicredit on Friday to discuss any proposals it has.
While other major eurozone lenders like BNP, ING and Spain’s Santander are being watched with interest, the most obvious alternative bidder for Commerzbank is Deutsche Bank.
For years, Christian Sewing, the CEO of Germany’s biggest lender, has played down a potential merger with its domestic rival but has backed more cross-border banking M&A.
Deutsche is the only other potential suitor with German operations of a scale comparable to Unicredit and may be easier for Berlin to approve of, given any deal would keep Commerzbank in domestic hands.
However, any bid against a rival with a 21 per cent stake would be challenging.
Other banking bosses have signalled support for Orcel and the broader notion of pan-European integration.
Lars Machenil, BNP’s chief financial officer, said on Thursday that he backed more consolidation in the region as the fragmented sector struggles to compete with Wall Street’s scale.
Onur Genc, who runs Spain’s second-biggest bank BBVA, has also endorsed a tie-up.
He told Reuters on Thursday that Europe risked falling behind global rivals if its politicians stood in the way of banking mergers.
Genc himself launched a €12.2bn (£10.3bn) hostile takeover bid for Sabadell in May after the rival lender rejected an all-share offer.
Spain’s government, while powerless to stop a potential takeover, has publicly opposed BBVA’s attempt. Sabadell owns Britain’s TSB Bank.
“We will lose an amazing opportunity to create some European banks who have scale enough to better invest in technology,” Genc said.