UniCredit makes low-ball Commerzbank offer in bid to secure talks

By Valentina Za, Ludwig Burger and Tom Sims

MILAN/FRANKFURT, March 16 (Reuters) – Italy’s UniCredit ratcheted up the pressure on Commerzbank to accept merger talks on Monday with an unsolicited offer to raise its stake in the German lender above 30% in a bid to unlock an 18-month stalemate.

“Our message to Commerzbank today is it is now time to talk,” UniCredit CEO Andrea Orcel told an analyst call.

Commerzbank said UniCredit’s proposal, whose modest premium implies a value for the German bank of roughly 35 billion euros ($40 billion), lacked key terms needed as a basis for discussions as well as any premium for shareholders.

The Frankfurt-based bank and the German government have both previously expressed strong opposition to a tie-up.

“We are convinced of the strength and potential of our strategy, which focuses on independence and profitable growth. This move is not coordinated with us,” Commerzbank CEO Bettina Orlopp said in a statement.

The government, which still owns nearly 13% of Commerzbank, reiterated a hostile takeover would be unacceptable.

But Commerzbank shareholder Union Investment renewed calls for it to engage in talks with Orcel, a veteran dealmaker who has led UniCredit to build various stakes in rivals since starting as CEO in 2021.

Orcel has so far failed to clinch a deal, saying his priority is to reward investors who have driven a near eight-fold increase in UniCredit’s share price in the past five years.

GERMAN TAKEOVER LAWS

UniCredit first invested in Commerzbank in September 2024 and gradually increased the stake, but ruled out launching a full bid as long as German takeover rules applied mandating a cash offer with a pre-set minimum price.

Such rules ceased to apply on February 22, six months after UniCredit last bought Commerzbank shares.

UniCredit said it now wanted to also work around German takeover laws that mandate a full buyout offer once the 30% ownership threshold in a company is crossed.

The low-ball bid should lift its holding only slightly above 30%, UniCredit said, and leave it free to buy Commerzbank shares on the market once the offer is completed.

UniCredit said it expected that to happen in the first half of 2027, once it secured all regulatory approvals.

“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.

Commerzbank shares rose 7% on Monday. As of Friday, they had lost nearly 15% since the start of the U.S.-Israeli war on Iran, while UniCredit’s had fallen by just over 12% amid heightened global market volatility.

“This seems to be an astute move, providing UniCredit with additional flexibility going forward,” Citi analysts said.

UniCredit owns a 26% equity stake in Commerzbank and another 4% through total return swap contracts. UniCredit reaped 378 million euros in profits from the stake last year.

UNICREDIT AIMING TO OVERCOME OPPOSITION TO MERGER

Orcel said UniCredit wanted to engage in discussions with German politicians and was open to offering terms that could bring everyone on board.

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 benefit German companies and the broader European economy.

Orcel has repeatedly said he needs the support of all stakeholders for a tie-up. But the cost-cutting that has made HVB much more profitable than Commerzbank has fuelled concerns among unions and politicians about job losses.

The premier of the German state of Hesse, home to Commerzbank, said on Monday that the state would assess UniCredit’s offer “diligently and without prejudice”, stressing that Frankfurt’s position as Europe’s leading financial centre must be strengthened.

Italy has said in the past it would fight any attempts by UniCredit to shift the group’s headquarters to Germany.

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 Commerzbank share.

That would imply 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; Tom Sims and Alexander Huebner in Frankfurt; Editing by Giulia Segreti, Kirsten Donovan, Joe Bavier and Alexander Smith)