On Monday, November 25, Italian UniCredit announced an unexpected 10 billion euros ($11 billion) bid for domestic peer Banco BPM.
UniCredit chief executive officer Andrea Orcel said that the mentioned bid would take precedence over any move by German Commerzbank. He also informed investors that the unsolicited offer is associated with increased consolidation in the Italian banking system. The corresponding process became a noticeable tendency, the existence of which contains no reason for doubt, after Banco BPM in the current month bought a stake in the state-backed Monte dei Paschi di Siena (MPS) and launched a bid fund manager Anima Holding.
Andrea Orcel stated that UniCredit cannot remain absent in the context of the mentioned actions. At the same time, it was separately noted that the bank headed by him did not show interest in MPS after walking away from taking the bailed-out peer off the state’s hands in 2021.
The bid by UniCredit was not positively received by the Italian government. Deputy Prime Minister Matteo Salvini expressed surprise that the mentioned financial institution, as he stated, changed its mind. In the relevant context, Mr. Salvini noted that he was aware of UniCredit’s intention to grow in Germany. The Deputy Prime Minister also said that he cared about BPM and MPS, two Italian financial institutions that cooperate and can join forces, did not face difficulties.
The all-share proposal, which provides a 0.5% premium to Banco BPM shareholders, followed UniCredit’s previous unsuccessful attempts to move on its competitor based in the Italian region of Lombardy.
Andrea Orcel stated that, in his opinion, in this case, there is nothing unexpected in choosing a partner. Separately, it was noted that there should not have been on Commerzbank, there should be even less on Banco BPM.
Andrea Orcel noted that in the background of cutting interest rates and profits compressing, it is more profitable for Banco BPM shareholders to hold UniCredit securities and reaping 1.2 billion euros per year in the form of pre-tax merger benefits, mainly by cost cuts. Mr. Orcel also hinted that the financial institution he heads considers the kind of cash sweetener Intesa Sanpaolo offered when it bought Banco BPM’s rival UBI in 2020.
Andrea Orcel said that since he took over UniCredit in 2021, acquisition aspirations will be realized, but first attention will be paid to increasing the value of the bank’s shares by almost five times.
The mentioned financial institution, which is the second largest in Italy, has prepared a proposal for a buyout of Banco BPM in 2022. It is worth noting that this proposal has not been launched.
Andrea Orcel stated that Unicredit can secure the desired return on investment in Banco BPM in the amount of at least 15%. This financial institution offers 0.175 of its common stocks for each equity of Banco BPM.
In September, Andrea Orcel rocked Europe’s financial industry. In this case, it is implied that he unveiled UniCredit’s stake in Commerzbank. It is worth noting that the mentioned information was received negatively in Germany. Against this background, speculation began to spread about the likelihood that Andrea Orcel would at some point attempt to buy all the bank based in Frankfurt.
On Monday, Mr. Orcel expressed concerns that UniCredit could engage in two directions at once. In this context, he noted that by the time a financial institution would have closed the second bid, it would have integrated the first bank. According to him, UniCredit currently has no management stretch.
The value of shares of Commerzbank in Frankfurt decreased by 6%. In Milan, UniCredit securities fell by 4%. At the same time, the value of shares of Banco BPM increased by 3%.
In a statement, UniCredit noted that about a 21% stake in Commerzbank built in part with derivatives conditional on supervisory approval, remains an important investment.
The German economy is currently going through a difficult period. Against this background, Berlin supported the preservation of Commerzbank’s independence. In the relevant context, the German authorities noted that the takeover of a financial institution would cause job losses and expose the lender to the sovereign risk of Italy.
The media also released information according to which German Chancellor Olaf Scholz said that unfriendly attacks and hostile takeovers are not a good thing for banks.
The Berlin administration currently retains a 12% stake in Commerzbank after rescuing the lender during the 2008 financial crisis and divesting 4.5% of its initial position in September.
Last week, Andrea Orcel said that discussions on a possible acquisition of Commerzbank should be postponed until the formation of a new German government next year. According to him, in the short term, UniCredit would have neither the base nor the ability to move.
The media, citing insiders, reported that the Banco BPM move came as a surprise to Commerzbank. One of the journalists’ informants noted that perhaps the takeover of the German lender is less likely.
Banco BPM, Italy’s third-largest bank, this month bought a 5% stake in MPS from the Treasury, which has long shown a favorable attitude towards the combination of two medium-sized financial institutions. The corresponding position is related to the fact that the state is pulling out of the MPS.
Also, in the current month, Banco BPM launched a 1.6 billion euro buyout offer for Anima. The lender is committed to boosting net fees. It is worth noting that the corresponding aspiration coincides with what is a priority for Andrea Orcel.
UniCredit said that the deal with Banco BPM, the implementation of which requires the approval of the European Central Bank and the antimonopoly regulator, could be concluded by June next year.
UniCredit is also currently awaiting approval for a potential buy up to 29.9% of Commerzbank.
Kian Abouhossein, head of European bank equity research and global IB coverage at JPMorgan Chase, suggests that it is unlikely that a financial institution headed by Andrea Orcel will be able to make both deals simultaneously.
As we have reported earlier, Italy Privacy Watchdog Fines Unicredit.
