By Valentina Za, Rachel More and Tom Sims

Germany Rebukes UniCredit's Stake Increase in Commerzbank

MILAN/BERLIN (Reuters) – Germany rejected UniCredit's latest attempt to increase its stake in Commerzbank as an "uncoordinated and unfriendly approach" on Wednesday, strongly rebuking the Italian bank.

UniCredit, which angered Berlin when it emerged as Commerzbank's biggest private investor in September, stated that it had raised its stake in Commerzbank to 28% using derivatives.

> "Today's news is remarkable because UniCredit had previously publicly emphasized that it did not want to take any further action before the federal elections," a German government spokesperson said in response to the development.

UniCredit CEO Andrea Orcel earlier mentioned that he wanted to wait for a new government in Berlin before making an offer, due to German takeover rules that require cash payment above a certain price if a full bid is launched within six months of acquiring at least 5%.

The spokesperson added, "We reject UniCredit's uncoordinated and unfriendly approach," emphasizing that the Berlin government is "working hard to find a good solution for Germany," without further details.

Reports from Reuters in October indicated that Germany, which is preparing for federal elections in February, is working to hinder a potential takeover. However, with limited legal options, attempts may not be fruitful according to sources.

UniCredit could not be reached for immediate comments.

Orcel’s actions have led to a clash with much of the German establishment, which is against both a takeover of the country's second-largest listed lender and the manner in which UniCredit has accumulated its stake. UniCredit has largely bought derivatives that can convert into shares discreetly.

UniCredit is currently awaiting clearance from the European Central Bank (ECB) to own up to 29.9% of Commerzbank, just below the threshold triggering a mandatory takeover offer, needing that approval to convert its current derivatives.

Currently, UniCredit holds 9.5% of Commerzbank directly and 18.5% through derivatives, having previously raised its stake to near 21% through similar means. This latest development increases the pressure on Commerzbank management, even as Orcel pursues another deal—acquiring Italian rival Banco BPM—which has encountered domestic challenges.

> "By securing a larger stake, UniCredit is positioning itself to exert greater influence over Commerzbank's management while limiting the German lender's strategic options," said Marco Troiano, Head of Financial Institutions, Scope Ratings.

UniCredit indicated that while merging with Commerzbank would be ideal, it could remain purely an investor or sell its stake for profit.

> "This move reinforces UniCredit's view that substantial value exists within Commerzbank that needs to be crystallized," UniCredit commented.

A spokesperson for Commerzbank stated that it continues to focus on its strategy, which will be presented to investors on February 13.

Shares of Germany's second-largest bank rose by 2.4% at 1445 GMT.

Meanwhile, UniCredit confirmed that the ECB authorization process, which can take up to 90 working days from the reception of documents, is ongoing, and communication with supervisors continues. The ECB opted not to comment.

Given the complexity of the evaluation, the assessment by the ECB is projected to last nearly the entire allotted period. UniCredit applied for Commerzbank clearance in September and recently indicated it was applying for its BPM bid as well.

UniCredit is no stranger to Germany, having owned Bavarian bank HVB since 2005. Since Orcel's appointment as CEO in 2021, he has strengthened HVB and enacted cost-cutting measures, providing a framework to enhance Commerzbank's returns, according to UniCredit.