Unicredit’s takeover bid for Commerzbank makes a new leap and, at least on paper, takes Andrea Orcel beyond the symbolic 50% threshold. The latest data on the bid launched by the Italian bank show an acceleration in subscriptions that further strengthens Piazza Gae Aulenti’s grip on the second-largest private German bank. The news was welcomed by the market in yesterday’s session, with gains for both stocks, while today both Unicredit and Commerzbank are trading in negative territory, indicating that investors continue to question the real chances of the deal going through.
HOW UNICREDIT REACHED OVER 50%
The jump came thanks to the weekly update of the public exchange offer launched by Unicredit on May 5. Subscriptions jumped to 7.58% of Commerzbank’s capital, compared to just over 1% previously reported. To this stake is added the 26.77% directly held by Unicredit and a further 3.22% represented by financial instruments with a physical settlement option in shares.
So far, the participation with shares and instruments settled in shares rises to 37.57%. However, the difference is made by derivatives settled exclusively in cash, which Unicredit increased from 10.7% to 13.19% of the capital. Orcel’s bank speaks of an aggregated position equal to 43.2%, while considering also the entire economic exposure linked to derivatives, the potential stake exceeds the 50% threshold, thus surpassing the absolute majority threshold.
The acceleration in subscriptions also confirms a scenario that several analysts considered increasingly likely. Already in recent days, as reported by Startmag, Mediobanca had calculated an overall exposure of Unicredit around 42% of Commerzbank’s capital net of treasury shares, noting that the 50% plus one share threshold “is getting closer and closer” and that a further 8-9% of subscriptions to the offer would have been enough to bring the Italian bank close to controlling the German institution.
Hence Unicredit’s satisfaction. The bank stated that it has “achieved the objective set at the start of the offer, namely exceeding the 30% threshold, aimed at ensuring certainty about its participation and preserving flexibility for possible acquisitions of further stakes later, should market opportunities arise.” According to the institution led by Orcel, the shares already tendered to the bid, combined with the direct participation and instruments with physical settlement, bring the total stake between 34.4% and 37.6%, above the 30% plus one share level that the bank had set out to reach.
According to Unicredit, cash-settled derivatives allow maintaining flexibility on the final level of participation, enabling the bank to evaluate later whether and how much to further increase its presence in Commerzbank’s capital. For Piazza Gae Aulenti, the level of subscriptions recorded so far would also indicate the value that the market attributes to the integration project between the two groups.
COMMERZBANK’S COUNTEROFFENSIVE
But while Unicredit celebrates surpassing 30% and a potential exposure beyond 50%, a equally clear response comes from Frankfurt.
Yesterday Commerzbank published a presentation dedicated to the shareholder structure and the real extent of the position accumulated by Unicredit. The message is clear: economic exposure and effective control of the bank do not coincide.
The German bank distinguishes between shares held directly, instruments with physical delivery, and cash-settled derivatives. According to the institution led by Bettina Orlopp, about 27% of the capital is directly held by Unicredit, a further 1% had already been tendered to the offer, and about 3% is linked to derivatives with physical settlement possibility. In total, therefore, the stake today attributable to the sphere of ownership of the Italian bank would be around 31%, far from the overall economic exposure indicated by Unicredit.
Commerzbank also insists that cash-settled swaps do not confer voting rights nor ownership of the shares and that their possible conversion into actual holdings would require further market steps. For this reason, the bank has again urged shareholders not to participate in Unicredit’s offer, confirming the negative judgment already expressed in recent weeks.
According to Commerzbank, to convert the derivative position amounting to about 14% of the capital into actually available shares, Unicredit or its counterparties might also have to purchase on the market a stake between 7% and 9% of the capital. In the same slides, the bank also highlights the shareholder composition, with about 17% held by institutional investors, 17% by passive funds, 16% by retail investors, and 13% still held by the German government.
ORLOPP, WEIDMANN AND THE GERMAN WALL
The new communication offensive fits into a line of opposition that Commerzbank has never abandoned.
CEO Bettina Orlopp had already argued at the shareholders’ meeting that the Italian offer does not reflect the intrinsic value of the bank and that the plan presented by Unicredit would be characterized by significant risks. According to the manager, moreover, the effects of a possible integration would entail a revenue loss exceeding one billion euros and restructuring costs higher than those estimated by the Italian bank.
Also, chairman Jens Weidmann has spoken out against the operation, urging shareholders not to subscribe to the takeover bid. In the background remains the strong political opposition from Berlin, which considers Unicredit’s initiative hostile.
Added to this is the trade union front. In recent weeks, workers’ representatives have organized demonstrations against the possible acquisition, evoking the risk of thousands of layoffs and openly contesting Orcel’s project.
NOT ALL OF GERMANY SAYS NO
In the German landscape, however, not all voices align with Commerzbank’s hard line. Thomas Gross, president of the German public banks association Voeb, believes that a possible acquisition could even create opportunities for other market operators. “Mergers always present opportunities also for competitors,” he observed, explaining that phases of uncertainty and reorganization tend to open commercial spaces both on the customer side and on the personnel recruitment side.
According to Gross, moreover, public banks would have the capacity to absorb any market shares left free by a future integration between Commerzbank and HypoVereinsbank. “The group of public banks is solid and can provide additional loans, if necessary,” he stated, adding that he sees “no risk” of credit crunches for German companies.
PANETTA AND THE ISSUE OF EUROPEAN CONSOLIDATION
The Commerzbank case fits into the broader debate on European banking consolidation.
In the Final Remarks presented last week during the Bank of Italy’s assembly, Governor Fabio Panetta noted that the high capitalization of the banking system “opens space for new aggregations, national and cross-border” and that both can contribute to strengthening the European banking market. Although without specific references to the Unicredit-Commerzbank operation, the passage was read by observers as support for the ongoing consolidation season in the sector.
For now, however, the gap between the two parties remains wide. Unicredit can claim to have consolidated an unprecedented position in the German bank’s capital, while Commerzbank continues to dispute the reading of the numbers proposed by Orcel. The next key deadline is June 16, the end of the public exchange offer.
