Germany on the defensive as UniCredit gains some support for Commerzbank talks

By Valentina Za and Christian Kraemer

MILAN/BERLIN (Reuters) -Germany cranked up its opposition on Wednesday to UniCredit’s raid on Commerzbank (ETR:CBKG) at the same time as a big investor in the German lender called for talks, which are being sought by the Italian bank’s CEO Andrea Orcel.

Red lines are being drawn a fortnight after UniCredit shocked politicians and investors by securing a significant stake in Commerzbank and Orcel laid out his vision for a rare cross-border European banking merger.

Berlin, which retains a 12% stake in Commerzbank, the bank’s management and trade unions all oppose a deal and a top German official called UniCredit’s actions “aggressive” and “unwise”.

However, six European Central Bank policymakers told Reuters they were broadly in favour of a tie-up and viewed Berlin’s opposition to a deal as running against the principle of European integration.

Orcel has said all options – including walking away – are on the table, while also building up UniCredit’s stake.

“Commerzbank, for us at the moment, is an investment, nothing else. There is no offer, there is no bid,” Orcel told a Bank of America investor conference in London.

“We’re indeed a large shareholder, a strategic shareholder now, but it is an investment … and people should comment and think about that as an investment and nothing else,” he said, adding UniCredit would not ask for a Commerzbank board seat.

But Orcel also pressed for more talks, saying UniCredit had spoken “repeatedly with several stakeholders” before it was invited to buy a 4.5% stake from the German government.

“We felt that that was a normal consequence of that process. And that’s where we are today, but we’re very keen to reopen those dialogues and have constructive dialogue with all the stakeholders,” he added.

UniCredit and numerous other investors expressed interest with the finance ministry in acquiring Commerzbank shares after its finance agency arm in early September said that Germany would begin paring down its stake, an official from the finance ministry said on Friday.

UniCredit was referred to the finance agency in an effort to treat all interested parties equally and revealed nothing further about its plans for Commerzbank, the person said.

GERMANY WARNS AGAINST HOSTILE TAKEOVERS

UniCredit angered the German government this week by raising its holding in Commerzbank to close to 21%, conditional on European Central Bank approval, using derivative instruments. 

German Chancellor Olaf Scholz slammed the move as “an unfriendly attack” and on Wednesday finance ministry state secretary Florian Toncar warned UniCredit against turning hostile, saying such takeovers harboured great risks.

“It is not wise to proceed too aggressively with a large, highly regulated, complex bank,” Toncar said after a closed-door meeting with the finance committee of Germany’s lower house of parliament. “You always need the stakeholders in the end.”

Orcel’s move is a test for European integration and a matter for markets, not politics, said former Italian Prime Minister Enrico Letta, who in April published a report on the future of the Single Market.

The move also poses a challenge for Commerzbank’s new chief executive Bettina Orlopp, who will assume the task of fending off UniCredit’s move on Germany’s No. 2 lender from Sept. 30, stepping up from her position as finance chief.

A large investor in Commerzbank on Wednesday urged it to engage with UniCredit.

“Cooperation with UniCredit – in whatever form – does not have to be to the detriment of Commerzbank,” said Union Investment fund manager Alexandra Annecke.

“We therefore expect a willingness to enter into an open-ended dialogue,” Annecke added in a statement by Union Investment, which holds 1.5% of Commerzbank.

Officials at the two main German business groups representing small to midsize enterprises also gave a tie-up their backing, citing the benefits of scale a cross-border merger could offer, mirroring UniCredit’s arguments.

“This could initiate the urgently needed transformation of Commerzbank’s ailing business to make it competitive again, which would be an advantage for German companies too,” said Marc Tenbieg, managing director of the DMB association which has more than 27,000 small and mid-sized business members.

Commerzbank had said its role as a key lender to the swathe of “Mittelstand” midsize companies that drive Europe’s top economy was grounds to resist UniCredit’s overtures.

Commerzbank shares have gained 21% since UniCredit first emerged as an investor in the early hours of Sept. 11, while UniCredit shares have risen by 4.8%.

Investors are betting on a full takeover bid by UniCredit, which is flush with cash after a run of record profits and already has a presence in Germany through its ownership of HVB.

UniCredit shares bucked a lower European sector on Wednesday to gain 1.6% after Orcel said 2024 profits would top 9 billion euros, hiking a former goal of above 8.5 billion, even after the Commerzbank investment.