Andrea Orcel, chief executive officer of Unicredit, in London, UK, on Thursday, Nov. 23, 2023.
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UniCredit CEO Andrea Orcel on Wednesday told CNBC that the share price of potential takeover target Commerzbank is currently too prohibitively expensive for a merger deal.
UniCredit has built a surprise stake in Commerzbank of 28% since September through derivatives and has the European Central Bank’s authorization to hold up to 29.9% in the lender.
When asked by CNBC’s Annette Weisbach whether the Italian bank would proceed with an acquisition offer at premium to Commerzbank’s current share value, Orcel said, “At this [share] level, we would not see value for our investors. Actually, we would not, we are very happy for the gain we’ve had on the 30[% stake], but we wouldn’t see value for our investors.”
Shares of the German bank, which has battled the specter of a takeover since September, have surged 76% in the year to date, benefitting from a broader rally of German equities following Berlin’s pivot to relax some fiscal rules and facilitate higher defense spend earlier this year.
Orcel stressed that UniCredit is presently “far away” from a merger bid with Commerzbank and would first seek a “constructive solution” to opposition from the German government.
“Secondly, in our opinion the share price has gone well beyond the fundamentals. There is a lot of activity which is directed at keeping the share price at higher level than you see every day, but we’re patient,” Orcel said.
CNBC has reached out to Commerzbank for comment. The German bank posted better-than-expected results in the first quarter, when net profit surged by an annual 29%.
Orcel insisted that his bank was initially invited to bid on Commerzbank — yet UniCredit’s play has been met with continuous resistance from both the German lender and the Berlin administration, under both the previous coalition of Olaf Scholz and the current government of Friedrich Merz.
Most recently, in a Yandex-translated letter addressing Commerzbank staff, Merz said that “an uncoordinated and an unfriendly approach such as that of UniCredit is unacceptable,” adding that the Berlin administration is “relying on a strong and independent Commerzbank.”
Since the end of last year, UniCredit has been divided between two potential hostile acquisition fronts, also facing opposition for its simultaneous takeover offer for Italy’s Banco BPM. When asked about potential intentions to create a sprawling empire across the European banking sector, Orcel likened UniCredit to the “private solution” to a European banking union.
Yet the bank’s courtship of its domestic peer has also been mired in hurdles. Italian authorities have granted a one-month suspension to the bid at the behest of UniCredit, which has cited the need to respond to Rome’s use of its “golden powers” in this transaction. Such powers allow the government to intervene in certain transactions on national security concerns.
Italian and European regulators have particularly advocated for UniCredit’s withdrawal from Russia, which remains under wide-branching European financial sanctions for its war in Ukraine. Orcel on Wednesday stressed the opacity surrounding the government’s expectations over UniCredit’s involvement in Russia.
“There is a debate on definitions. There is a debate on what does it mean [to] cease activity in Russia, for example. In our opinion, we have ceased. We have not given any new loans since [20]21,” he said.
The lack of clarity could leave UniCredit exposed to exorbitant penalties of around 20 billion euros, Orcel noted — casting a shadow over the appeal of the Banco BPM pursuit.
“This is a risk we cannot take. So if the government clarify, or if we clarify with the government those [requirements] and they are as we think they are, I think there is a good probability [we] will continue [the Banco BPM takeover process]. If we do not reach that, then we will pull back and move on,” he said.