UniCredit acquired an initial 4.5% stake in Commerzbank after the German state sold its shares, bringing its total holding to over 9% of the German bank's shares. When the Italian bank announced its intention to apply to the ECB to pass the 10% threshold, the news hit like a bombshell.

A discreet operation

On Wednesday, September 11, 2024, while holding 16.49% of Commerzbank's capital, the German Federal Finance Agency launched the bidding for a block of 4.49%. For German finance, the placement was excellent, generating total proceeds of 702 million euros. In fact, UniCredit Group outbid all other bidders by a significant margin. At 13.20 euros per share, the allotment price was higher than the daily closing price of 12.60 euros per share. But this was without suspecting that the Italian bank already held 4.5% of Commerzbank's capital, confirming for good the takeover plan led by Andrea Orcel.

An Italian bank with aggressive liabilities

Capitalizing on the restructuring carried out by his predecessor Jean-Pierre Mustier, Andrea Orcel has transformed UniCredit. Today, the bank is stronger than ever, with a strategic fund estimated at between 6 and 7 billion euros. After breaking off talks to acquire Banca Monte dei Paschi di Siena at the end of 2021, which strained relations with the various Italian governments, Orcel's breakthrough in Germany seems to have the implicit approval of Giorgia Meloni, the Chairman of the Board.

By combining Commerzbank and its subsidiary HypoVereinsbank (HVB), which Andréa Orcel advised UniCredit to buy in 2005 when he was an investment banker, UniCredit could double its market share to 16% in the corporate finance and SME lending market, according to Citi analysts. This could enable it to overtake Deutsche Bank in this segment, considered to be the heart of the German market.

However, the prospect of losing the Mittelstand, the core group of stable companies that drive the German economy, is a cause for concern in Frankfurt. Moreover, however laudable the Italian institution may be, the shadow of the 2005 takeover of HVB, whose workforce has shrunk from 30,000 to 10,000 in 20 years, still looms large.

The German bank's efforts - including job cuts since 2016 and the closure of hundreds of branches - have paid off, enabling it to return to the DAX in February 2023. The bill was nevertheless a heavy one for Germany, which had injected 18 billion euros in the wake of the subprime crisis. No decision has been taken on the German side, although the German government has undertaken not to sell its 12% stake in the company.

Hostility turns to friendship

If the operation had all the appearance of aggression, UniCredit chose instead to reassure and, above all, convince. In fact, once the news had been digested, the maneuver actually brought the parties closer together. The German government is in talks, and Commerzbank intends to pursue the discussions, albeit warily.

Asked about the possibility of UniCredit launching an unsolicited takeover bid to buy out Commerzbank's other investors, Mr. Orcel replied: "No, that would be an aggressive offer that could not be accepted".

Taken together, these statements should ease the talks and perhaps open the door to a possible takeover. It is worth noting that Deutsche Bank remains on the sidelines. The creation of a German champion was considered for a time, but never came to fruition. To be continued...