Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
UniCredit has increased its stake in Commerzbank from about 9 per cent to 21 per cent, a hostile move that marks a sharp escalation in the tensions between the Italian bank and the German government.
UniCredit said on Monday that it had taken a position in a further 11.5 per cent of Commerzbank’s shares, two weeks after its disclosure of a 9 per cent stake in the bank — half of it acquired from the German government — took the country’s establishment off-guard and ignited political opposition against a cross-border tie-up.
The latest move by UniCredit’s chief executive Andrea Orcel comes after Berlin on Friday said it would no longer sell down its remaining 12 per cent holding, an apparent reversal of the plan laid out earlier this month to gradually reduce its stake.
UniCredit, which has long courted Commerzbank as a takeover target, needs approval from the European Central Bank to lift its holding above 10 per cent, and the latest trade will not settle until “the required approvals have been obtained”.
However, if it does secure approval, UniCredit will leapfrog Berlin as Commerzbank’s largest shareholder, ratcheting up the pressure on the German government.
The Italian bank has already submitted a request to raise its interest to 29.9 per cent — a process that can take up to 90 days in complex cases. UniCredit would need to go back to the ECB if it wanted to raise its stake above 50 per cent.
A merger between the two groups would be the first significant cross-border bank deal in Europe since the financial crisis and a potential catalyst for further consolidation across the continent’s fragmented sector.
Orcel has set his sights on acquiring European rivals, with the potential to turn the Italian lender into a vehicle for consolidating the sector.
But his move on Commerzbank has caused uproar in Germany, with politicians and labour unions opposing a full takeover.
People close to the German government told the Financial Times last week that opposition to a takeover by UniCredit was hardening. On Friday, the government announced it would not sell any further Commerzbank shares “until further notice”, stressing that the lender’s strategy “is geared towards independence”.
Executives at Commerzbank have warned the German government that a tie-up with UniCredit could hobble lending to small and medium-sized Mittelstand companies, while unions have raised the prospect of job cuts.
People familiar with the Milanese’s lender thinking have pushed back against such criticism, adding that Orcel had no intention of taking steps that could be perceived as hostile by the German government.
There was no immediate comment from the German finance ministry. But Friedrich Merz, leader of the opposition, was highly critical of UniCredit’s latest move, saying a takeover of Commerzbank by the Italians would be a “disaster for the German banking sector”.
“The German banking industry is being massively weakened,” he told reporters. Commerzbank “provides much of the lending to the Mittelstand, and also is responsible for a large part of our export finance. This is a hugely important bank for the German economy.”
UniCredit and the German government have been at odds with each other on what information was shared with Berlin ahead of the stake building.
Orcel has publicly stated that UniCredit informed the German government of its existing position in Commerzbank’s shares before acquiring the block of stock that took its total position to 9 per cent and put the bank in play.
Officials in Berlin told the FT that they had not been informed until the last minute. People close to the talks said there were disagreements and a breakdown in communications within the German government.
The German government’s statement on Friday and its refusal to engage in negotiations over the sale of its remaining stake, prompted a change in strategy by UniCredit, according to two people familiar with the matter.
The Italian bank said in a statement on Monday announcing its increased stake that “there is substantial value that can be unlocked within Commerzbank, either standalone or within UniCredit, for the benefit of Germany and the bank’s wider stakeholders”.
It said the majority of its position had been hedged to “provide full flexibility and optionality to either retain its shareholding, sell its participation with a floored downside, or increase its stake further”.
Read the full article here