Sonali Ray, writer
Brief news
- German authorities strongly oppose UniCredit’s merger attempt with Commerzbank, citing potential job losses and national embarrassment.
- UniCredit has increased its stake in Commerzbank to 21% and seeks to raise it to 29.9%, prompting concerns from German officials and Commerzbank’s leadership.
- The situation raises questions about the implications for European integration and the banking union, with experts emphasizing the need for Germany to justify any intervention against the merger.
Detailed news
German authorities have responded strongly to Italy’s UniCredit’s apparent surprise merger of Commerzbank, situated in Frankfurt, with the potential for multibillion-euro value.
The German government, which fiercely opposes the takeover attempt, may have been embarrassed by the swoop, according to market watchers who spoke to CNBC. It has also been suggested that the outcome of the takeover attempt may potentially affect the meaning of the European Union.
UniCredit, headquartered in Milan, revealed on Monday that it has raised its investment in Commerzbank to around 21% and has filed a request to extend that holding to as much as 29.9%. This follows UniCredit’s acquisition of a 9% share in Commerzbank earlier this month.
“Should UniCredit successfully enhance Commerzbank’s efficiency, there exists significant potential for augmented profitability,” stated Octavio Marenzi, CEO of consultancy firm Opimas, during an interview on CNBC’s “Squawk Box Europe” on Tuesday.
“However, [German Chancellor] Olaf Scholz is not an investor.” He is a politician who is highly concerned about employment issues. Marenzi remarked, “UniCredit’s efforts to streamline its Italian and particularly German operations have been quite impressive.”
On Monday, Scholz condemned UniCredit’s decision to escalate its position on Commerzbank, characterizing the action as a “unfriendly” and “hostile” assault, according to Reuters.
Uwe Tschaege, Deputy Chair of Commerzbank, allegedly expressed dissent about a proposed acquisition by UniCredit on Tuesday. Addressing the media outside the lender’s offices in downtown Frankfurt, Tschaege articulated a straightforward and unequivocal message: “We reject this.”
“Hearing his promises of cost savings induces a sensation of nausea,” Tschaege allegedly stated, referring to UniCredit’s CEO Andrea Orcel.
Stefan Wittman, a member of the Commerzbank supervisory board, said CNBC on Tuesday that up to two-thirds of the bank’s positions may be eliminated if UniCredit executes a successful hostile acquisition.
The bank has not yet responded to a request for commentary about Wittmann’s comments.
Hostile takeover offers are rare in the European banking sector; nonetheless, Spanish bank BBVA surprised investors in May by initiating an all-share buyout proposal for domestic competitor Banco Sabadell. The aforementioned Spanish lender declined the offer.
Marenzi of Opimas stated that the German government and trade unions are essentially considering the potential for significant job losses as a consequence of this situation.
“Additionally, there may be a national embarrassment in that the Italians are demonstrating how to manage their banks,” he remarked.
A representative of the German government was unavailable for comment when reached by CNBC on Tuesday.
Scholz of Germany has previously advocated for the establishment of a European financial union. In response to the 2008 global financial crisis, the European Union’s executive body proposed the establishment of a banking union to enhance the regulation and oversight of financial institutions throughout the area.
What are the implications?
Craig Coben, the former global head of equity capital markets at Bank of America, stated that the German government must have “very good” justifications to obstruct UniCredit’s acquisition of Commerzbank, cautioning that such a decision must align with the tenets of European integration.
Coben stated on CNBC’s “Squawk Box Europe” that it is exceedingly challenging for UniCredit to acquire or negotiate with Commerzbank without the German government’s consent. He emphasized that Germany must devise a valid rationale if it intends to intervene or obstruct UniCredit’s efforts.
“Germany has committed to the EU’s single market, the single currency, and the banking union; thus, it would be inconsistent with these principles to obstruct the merger on the basis of national interest,” he said.
“I believe that the core issue at hand is the significance of the banking union.” What is the significance of the European project?
Mario Draghi, the former president of the European Central Bank, stated in a study released earlier this month that the European Union requires hundreds of billions of euros in supplementary investment to achieve its essential competitiveness objectives.
Draghi, a former Italian prime minister, identified the “incomplete” banking union in the study as a cause that perpetuates the lack of competitiveness among the region’s banks.
Source : CNBC News
