How very un-European! Italy’s UniCredit banking group has been stalking Germany’s second-largest bank, Commerzbank, and getting nowhere, with Germany Inc. starting to circle the wagons—led by the country’s biggest bank, Deutsche Bank.
It was revealed on Monday that UniCredit had increased its stake in Commerzbank from about 9% to 21%, a move that could kick-start a hostile bid for the rival lender.
UniCredit said it had bought financial instruments representing an additional 11.5% stake in the German lender, on top of its existing holding.
In this context, ‘financial instruments’ are not actual shares but what are called financially settled swaps, allowing the buyer to claim non-economic ownership of a financial asset—in this case, Commerzbank shares.
Whether UniCredit keeps the shareholding, sells it, or raises it further will depend on engagement with Commerzbank’s management, supervisory boards, and other stakeholders in Germany, the bank said.
“UniCredit believes 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,” the bank stated.
UniCredit had submitted a regulatory filing to be allowed to hold over 10% and up to 29.9% of Commerzbank, it added. The settlement under the new financial instruments will occur only after the necessary approvals are secured.
The German government owns around 12% of Commerzbank, after initiating the process by selling a 4.5% stake to UniCredit. This raised speculation that the government might support a bid for Commerzbank.
However, Commerzbank warned that any merger with UniCredit would pose a danger to German businesses.
On Monday, the government made it clear that it was paying attention (after poor results in regional elections) and said it would retain its 12% stake.
As a result, UniCredit shares fell more than 3%, while Commerzbank shares slumped by over 5%.
End of story?