Andrea Orcel’s big bet on Commerzbank enters perhaps its decisive phase and Unicredit’s shareholders do not seem willing to back down. On Monday they approved by a large majority the capital increase that makes possible, at least formally, the launch of the public takeover bid on the German institution.
Amid this battle comes also a record quarter: in the first three months of this year the Milanese bank closed with profits of 3.2 billion euros, 16% more than the same period last year, exceeding analysts’ expectations. Numbers that Orcel takes as a confirmation, at a time when he particularly needs it.
On the German front, reading the matter carefully from the columns of the Handelsblatt is Jakob Blume, a journalist expert in international finance, who in an editorial titled “Mega bank merger: Andrea Orcel’s risky bet” lines up both Unicredit’s operational results and the shadows of an operation that promises to be anything but simple.
THE RISKS OF THE BIG BET
The most peculiar point, according to Blume, is that the main reasons for concern do not come from opponents of the operation nor from skeptical analysts, but from Unicredit itself. In the information document prepared for the extraordinary meeting, the bank explicitly listed the risks it sees in a possible acquisition of Commerzbank: loss of important clients, departure of key figures, possible resistance from minority shareholders.
The text warns that “the expected strategic advantages, efficiency gains and potential synergies” might not materialize at all. It adds that an integration process “would require a lot of time and resources from management,” diverting it from ordinary management and causing it to miss other market opportunities.
These are usual formulations in operations of this scale, but the fact that they come from the acquiring party gives them a weight that should not be underestimated – writes the Handelsblatt.
THE RESISTANCE FROM BERLIN
Then there is the political issue, which weighs no less than the financial one. The German government holds 12% of Commerzbank: a share not sufficient to block a majority acquisition, but enough to prevent total control and a possible delisting from the stock exchange. Berlin has shown no intention of softening its position, and the shock strategy chosen by Orcel, observes Blume, has rather contributed to stiffening it further: “Orcel’s acquisition strategy has not induced Berlin to give up resistance, quite the opposite.”
Within the German institution itself, the climate is no more favorable than on the political front: in a bank trust is everything, writes the economic daily, and an acquisition perceived as hostile tends to push out precisely the most qualified professionals, often dragging with them clients who have followed them for years: “If the best collaborators leave taking important clients with them, the attractiveness of an acquisition can decrease significantly.” Orcel knows this well, yet he decided to go ahead without seeking mediations: but this “could push other Commerzbank employees to flee.”
THE MOOD OF THE MARKETS
The mandate obtained on Monday is broad, and Orcel was seeking it with determination. But Blume urges not to read it as a definitive judgment on the goodness of the operation. On an annual basis Unicredit’s stock continues to lag behind Commerzbank’s, the editorial argues, a sign that markets have not yet fully digested the entire game. “It remains to be seen whether Orcel’s uncompromising acquisition line will be appreciated in the long term by his shareholders,” concludes the Handelsblatt: Unicredit’s CEO still “has a lot of work to do to convince all parties involved.”
