By Valentina Za, Tom Sims and Andreas Linke
MILAN/FRANKFURT (Reuters) – German Chancellor Olaf Scholz has denounced UniCredit's move to take a 21 percent stake in rival Commerzbank to become its largest investor as an “unfriendly attack”, in a sign of growing hostility towards Italian banks.
Anger from German authorities over UniCredit's use of derivatives to more than double its potential holdings before getting regulatory approval has piled pressure on supervisory authorities at the European Central Bank, led by German academic Claudia Buch.
“Unfriendly attacks and hostile takeovers are not good for banks, which is why the German government has clearly set this direction,” Scholz said on the sidelines of an event in New York.
His comments sent Commerzbank shares falling 5.7% as investors reassessed the possibility of an outright takeover. UniCredit fell 3%.
UniCredit Chief Executive Andrea Orsel's bold attempt to create Europe's largest bank is a test of the European Union's determination to remain globally relevant beyond its borders.
Germany's financial regulator said on Friday that it would not sell any more shares in Commerzbank for now because the bank's strategy was “oriented towards independence.”
Commerzbank confirmed its acquisition of UniCredit's shares, saying it would “always consider strategic options responsibly in the interest of its shareholders.”
Shares in German bank Commerzbank have risen by more than a fifth since UniCredit revealed a 9% stake, making it the largest private investor after the German government. Commerzbank's market capitalization accounts for about a third of UniCredit's more than 60 billion euros.
“The situation has taken an unexpected turn as the market was expecting a gradual timeline, no near-term action and a 'friendly development,'” Citi analysts said.
Labor unions are opposed
German trade union Verdi opposed the move and vowed to “fight with all means for independence.” Commerzbank auditor Stephan Wittmann called it a “totally inappropriate and aggressive move” and said the bank expected the government to oppose any deal.
Politicians and unions have warned that the merger could lead to large numbers of jobs being lost and undermine lending to small businesses.
With more than 25,000 corporate clients, accounting for almost a third of Germany's foreign trade payments and more than 42,000 employees, Commerzbank is a key player in the German economy.
The Italian bank defended the benefits of combining Commerzbank with UniCredit's German business, which is leaner and more profitable than Commerzbank.
“UniCredit is confident that it can unlock significant value within Commerzbank, both alone and within UniCredit, for the benefit of Germany and the bank's wider stakeholders,” it said in a statement.
Italian Foreign Minister Antonio Tajani welcomed UniCredit's decision.
“Something is missing in just lip service to Europe,” Tajani said.
sucker punch
Orsel already has a similarly sized stake in the market and surprised the German government this month by outbidting rivals to buy 4.5 percent of Commerzbank from the German government.
The rising tensions come at a time of political unrest in Germany, where the country's three governing parties are frequently at odds and continue to lose support to the ultra-conservative Alternative for Germany.
The confusion could make it even harder for the government to mount a strong response to an unwanted Italian invasion.
“UniCredit has a head start with this big stake acquisition. It's building some momentum, but the German government is still figuring out how to view it,” said Michael Grote, professor of corporate finance at the Frankfurt School of Finance and Management.
Orsel, a star investment banker who engineered some of Europe's biggest bank mergers in recent decades, would not have moved if he had not been welcomed, he said, adding that he had met in Germany over the summer.
The government owns 12% of Commerzbank.
UniCredit, which bought Bayerische Bank HVB in 2005, has repeatedly targeted Commerzbank over the past two decades.
The bank said it had applied to increase its stake in Commerzbank to 29.9 percent, after also signing a derivative agreement on Monday to acquire an additional 11.5 percent in the bank.
The European Central Bank must approve any shareholding in a bank above thresholds such as 10%, 20% or 30%. Under German corporate law, a 30% stake triggers a mandatory takeover bid.
UniCredit will only acquire the derivatives-linked stake in Commerzbank if it gets the go-ahead from the ECB, which must make a decision within a maximum of 60 days, but that could be extended to 90 days.
(Reporting by Valentina Za in Milan and Tom Sims in Frankfurt; Additional reporting by John O'Donnell in Frankfurt and Rene Wagner in Berlin; Editing by Gianluca Semeraro and Louise Heavens)
