Germany Opposes UniCredit’s Raid on Commerzbank

By Valentina Za and Christian Kraemer
MILAN/BERLIN (Reuters) – Germany intensified its resistance to UniCredit’s acquisition of Commerzbank on Wednesday, coinciding with a call for talks from a major investor in the German bank.

Red lines are being drawn two weeks after UniCredit startled politicians and investors by acquiring a significant stake in Commerzbank, with CEO Andrea Orcel articulating his vision for a rare cross-border European banking merger.

Berlin, holding a 12% stake in Commerzbank, along with the bank’s management and trade unions, opposes the deal. A senior German official labeled UniCredit’s actions as “aggressive” and “unwise”.

Despite this, six European Central Bank policymakers spoke to Reuters, expressing general support for the merger, viewing Berlin’s opposition as inconsistent with the principle of European integration.

Orcel indicated that all options, including withdrawing, are on the table while increasing UniCredit’s stake. “Commerzbank is presently an investment for us, nothing else. There is no offer, there is no bid,” he stated at a Bank of America investor conference in London.

He emphasized UniCredit’s role as a strategic shareholder but asserted that UniCredit would not seek a seat on Commerzbank’s board. Orcel also urged for renewed dialogue, noting that UniCredit had previously engaged with various stakeholders before acquiring a 4.5% stake from the German government.

Numerous investors, including UniCredit, expressed interest in acquiring shares of Commerzbank following Germany’s announcement to reduce its stake, according to a finance ministry official.

GERMANY WARNS AGAINST HOSTILE TAKEOVERS

This week, UniCredit angered the German government by increasing its holding in Commerzbank to nearly 21%, pending approval from the European Central Bank, using derivative instruments.

German Chancellor Olaf Scholz condemned the action as an “unfriendly attack”. Finance ministry state secretary Florian Toncar cautioned UniCredit against adopting a hostile approach, highlighting the risks involved with large, well-regulated banks.

Enrico Letta, former Italian Prime Minister, mentioned that Orcel’s actions should be assessed as a test for European integration and financial markets, separate from political dimensions.

Commerzbank’s new CEO, Bettina Orlopp, will face the challenge of responding to UniCredit’s advances starting September 30.

A significant investor in Commerzbank advocated for engagement with UniCredit, stating, “Cooperation with UniCredit – in whatever form – need not be detrimental to Commerzbank,” according to Union Investment fund manager Alexandra Annecke.

Several German business groups also supported a potential merger, emphasizing the advantages of scale that a cross-border merger could provide. They believe it could revitalize Commerzbank’s struggling business, benefitting German companies.

Commerzbank maintains that its position as a primary lender to Europe’s precarious “Mittelstand” sector justifies resisting UniCredit’s approach.

Shares of Commerzbank have risen 21% since UniCredit’s initial investment announcement on September 11, while UniCredit shares increased by 4.8%.

Investors speculate that UniCredit might pursue a complete takeover, bolstered by substantial cash reserves from recent record profits and an existing presence in Germany through HVB.

UniCredit shares rose by 1.6% on Wednesday after Orcel forecasted profits for 2024 to exceed 9 billion euros, surpassing the prior goal of more than 8.5 billion, despite the ongoing situation with Commerzbank.