By Valentina Za and Tom Sims
MILAN (Reuters) -The European Central Bank has given UniCredit the green light to buy up to 29.9% of Commerzbank, the Italian bank said on Friday, adding it would likely wait until next year before deciding whether to pursue a full takeover.
With Germany up in arms against the potential acquisition, UniCredit’s CEO Andrea Orcel, one of Europe’s most experienced dealmakers, has thrust his bank into fast-moving Italian consolidation and put his ambitions for a pan-European tie-up on the back-burner.
The ECB’s approval was expected given UniCredit’s strong balance sheet and banking supervisors’ supportive stance on consolidation efforts, yet it marks a key step towards what could potentially be Europe’s biggest cross-border industry deal since the global financial crisis.
“The ECB has removed a powerful argument Germany could have used to oppose a potential acquisition,” said Ignazio Angeloni, a former ECB superviser, now senior policy fellow at Bocconi University’s Institute for European Policymaking.
A tie-up would create “a unique and innovative cross-border bridge” between two “conservative” banking markets, he added.
UniCredit’s plans for Commerzbank have sparked an angry backlash in Germany, with the Frankfurt-based lender that Berlin rescued in 2009 vowing to pursue independent growth.
“UniCredit is awaiting the opportunity to initiate a constructive dialogue with the new German government once formed,” the bank said in a statement.
Germany’s finance ministry said on Friday the ECB’s decision did not change its stance.
Orcel has repeatedly said he would consider a full takeover only if all stakeholders are supportive.
“While the approval underscores UniCredit’s financial strength and regulatory compliance, there are still many factors that will determine any further steps and their associated timeline,” the Milanese bank said.
“Our original timeline for deciding on whether to proceed or not with a potential combination is now likely to extend well beyond the end of 2025,” it added.
UniCredit’s ambitions over Commerzbank date back to 2001, even before its 2005 acquisition of Munich-based HVB.
After failed attempts by his predecessors to grow UniCredit’s German footprint, Orcel in September outbid rivals in a government sale of Commerzbank shares, doubling the stake he had already bought on the market. He then went on to accumulate the right to own 28% of the bank through derivatives.
Clearance from Germany’s competition authority is necessary before UniCredit can convert the derivatives into shares.
Commerzbank said it had taken notice of the ECB’s decision, which did not change UniCredit’s position as a mere shareholder.
“We are convinced of our strategy, which aims for profitable growth and value increase, and we are focusing on its successful implementation,” it said in a statement.
DEALMAKING OPTIONS
With consolidation in UniCredit’s home market speeding up due to Rome’s own privatisation plans for bailed-out bank Monte dei Paschi di Siena, Orcel has been forced to shift his focus to domestic dealmaking.
In November, UniCredit unveiled an all-share hostile bid for domestic rival Banco BPM. Late on Thursday UniCredit said it had received ECB approval to issue the shares needed to fund the takeover, currently worth up to 13.5 billion euros ($14.7 billion).
It is expected to launch its Italian takeover next month. Orcel has reassured investors that the two potential deals will not overlap, pushing back the timeline for a Commerzbank decision.
Orcel has also acquired a 4.2% stake in Generali and built derivatives for clients to hold another 5%-plus of Italy’s biggest insurer. UniCredit has said the Generali stake is only a financial investment, but bankers say it strengthens Orcel’s hand in the M&A game unfolding in Italy.
($1 = 0.9207 euros)
(Reporting by Valentina Za; Editing by Tommy Reggiori Wilkes, Giulia Segreti, Susan Fenton and Elaine Hardcastle)
