By Valentina Za, Ludwig Burger and Tom Sims
MILAN/FRANKFURT, March 16 (Reuters) – Italy’s UniCredit launched an unsolicited bid to increase its stake in Commerzbank above 30% on Monday in an effort to unlock an 18-month stalemate and push its German rival to accept merger talks.
The surprise offer, whose modest premium implies a value for Commerzbank of roughly 35 billion euros ($40 billion), ratchets up pressure on the lender and the German government, which have both previously expressed strong opposition to a tie-up.
“Our message to Commerzbank today is it is now time to talk,” UniCredit CEO Andrea Orcel told an analyst call.
German takeover laws mandate a full buyout offer once a suitor crosses the 30% ownership threshold in a company. UniCredit said its low-ball offer should lift its holding just above that threshold, and leave it free to buy Commerzbank shares on the market in the future.
“This is a more ‘technical’ offer, aimed at managing the issue related to the German takeover code,” said Jerome Legras, head of research at Axiom Alternative Investments fund.
Commerzbank declined to comment. Shares in the German lender rose 4% in early Monday trading.
“This seems to be an astute move, providing UniCredit with additional flexibility going forward,” Citi analysts said.
UniCredit said it did not expect to achieve control of the German lender, in which it already holds a 26% equity stake and another 4% through total return swap contracts.
“The offer is designed to overcome the 30% cliff-edge that exists under German takeover law and foster constructive engagement with Commerzbank and its stakeholders in the coming weeks,” UniCredit said.
UNICREDIT AIMING TO OVERCOME OPPOSITION TO MERGER
Orcel said UniCredit also wanted to engage in discussions with German politicians and was open to offering terms that could bring everyone onboard.
The European Central Bank is pushing for more banking consolidation, especially cross-border, to counter the growing presence of U.S. banks in Europe. But that effort has met with widespread opposition from national governments, which want to retain influence over their banking sectors.
UniCredit already has a sizeable presence in Germany through its HVB bank and has said a merger with Commerzbank would be a boost for both the German banking market and broader European desires to build larger, stronger lenders.
But following its initial investments, UniCredit has met German push-back to a full takeover of Commerzbank, and Orcel has repeatedly said he would only launch such a move if all stakeholders were supportive.
Germany’s government owns a nearly 13% stake in Commerzbank, and some German politicians have bristled at Orcel’s aggressive tactics.
The premier of the German state of Hesse, home to Commerzbank, said on Monday that the state would assess UniCredit’s offer for Commerzbank “diligently and without prejudice,” stressing that Frankfurt’s position as Europe’s leading financial centre must be strengthened.
Under German rules, the markets authority will determine the price of the offer, UniCredit said, adding it expected it to be set at 0.485 of a UniCredit share for each share of Commerzbank. That would imply a price of 30.8 euros per Commerzbank share, or a 4% premium on the German bank’s closing price on March 13.
($1 = 0.8744 euros)
(Reporting by Valentina Za in Milan, Ludwig Burger and Tom Sims in Frankfurt; Editing by Giulia Segreti, Kirsten Donovan and Joe Bavier)
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