Germany's Scholz slams UniCredit 'attack' on Commerzbank, stiffening opposition

By Valentina Za, Tom Sims and Andreas Rinke

MILAN/FRANKFURT (Reuters) -German Chancellor Olaf Scholz slammed as "an unfriendly attack" a move by UniCredit to become the biggest investor in rival Commerzbank (ETR:CBKG ) with a potential 21% stake, in a sign of growing hostility towards the Italian bank.

The German establishment's anger towards UniCredit using derivatives to more than double its potential stake before receiving regulatory approval piles pressure on European Central Bank supervisors, led by German academic Claudia Buch.

"Unfriendly attacks, hostile takeovers are not a good thing for banks and that is why the German government has clearly positioned itself in this direction," Scholz said on the sidelines of an event in New York.

His words sent Commerzbank shares down 5.7% as investors reassessed the chances of a full takeover. UniCredit fell 3%.

UniCredit CEO Andrea Orcel's bold attempt to build Europe's biggest bank has become a test of the bloc's resolve to overcome national borders to retain global relevance.

On Friday Germany's finance agency said it would not sell any more Commerzbank shares for now, with the bank's strategy "geared towards independence."

Acknowledging UniCredit's stakebuilding, Commerzbank said it would "always examine strategic options responsibly in the interests of its stakeholders".

Shares in the German lender have gained more than one fifth since UniCredit revealed it had a 9% stake, which made it the biggest private investor after the German state. Commerzbank is worth around a third of UniCredit's over 60 billion euros in market value.

"The situation has taken an unexpected turn, as the market was expecting a slow timeline and no action in the short term, as well as ... a 'friendly development'," Citi analysts said.

UNIONS OPPOSED

Germany's Verdi union opposed the development and vowed to "fight with all means for independence." Commerzbank Supervisory Board Member Stefan Wittmann deemed it a "completely inappropriate, aggressive act" and said the bank expected the government to fight any deal.

Politicians and labour unions have warned that a merger could lead to massive job losses and stifle lending to small and medium-sized businesses.

Commerzbank, with more than 25,000 business customers, almost a third of German foreign trade payments and more than 42,000 staff, is a linchpin of the German economy.

The Italian bank defended the merits of a combination of Commerzbank with UniCredit's German business, which is leaner and more profitable than Commerzbank's.

"UniCredit believes that there is substantial value that can be unlocked within Commerzbank, either stand-alone or within UniCredit, for the benefit of Germany and the bank's wider stakeholders," it said in a statement.

Italy's Foreign Minister Antonio Tajani welcomed UniCredit's decision.

"Being pro-European only in words leaves something to be desired," Tajani said.

BLINDSIDED

Orcel had already blindsided the German government when it outbid rivals in a tender to buy 4.5% of Commerzbank from the state this month, having already amassed a similar sized stake on the market.

The escalation comes at a time of political upheaval in Germany, where the three political parties governing the country frequently clash and continue to lose ground to the ultra conservative Alternative for Germany party.

This disarray could make it harder for the government to forge a strong response the unwanted Italian advance.

"UniCredit now has a better starting position with this large share package ... It creates a certain momentum, while Berlin is still considering how to view it," said Michael Grote, corporate finance professor at the Frankfurt School of Finance & Management.

Orcel, a star investment banker who engineered some of Europe's biggest banking mergers in recent decades, has said he would not have moved had he been unwelcome, adding he held meetings over the summer in Germany.

The state retains 12% of Commerzbank.

UniCredit, which in 2005 bought Bavarian bank HVB, has repeatedly targeted Commerzbank in the past two decades.

It said it had applied to increase its Commerzbank holding to 29.9%. Meanwhile it entered derivatives contracts on Monday to acquire a further 11.5% of the bank.



The European Central Bank must approve share ownership in a bank crossing thresholds set at 10%, 20%, 30% and so on. Under German corporate laws a 30% ownership triggers a mandatory buyout offer.

UniCredit would only take possession of the Commerzbank shares linked to the derivatives if it secured ECB approval. The ECB has up to 60 days, which can be extended to 90, to rule.

Source: Investing.com