(Bloomberg) -- A merger between UniCredit SpA and Commerzbank AG is likely, despite opposition from the German government, according to analysts at Citigroup Inc.
Citi analysts including Borja Ramirez expect UniCredit will eventually get regulatory approval to increase its stake in Commerzbank and will win the backing of institutional shareholders if it opts to make a tender offer for the German lender.
“In the long-run, we believe a tie-up between the two is the most likely outcome,” the analysts wrote in a note on Thursday. The market is pricing a 70% probability of a deal at a 10% premium, they added.
Earlier this month, UniCredit disclosed a 21% stake in Commerzbank and the Italian lender’s chief executive officer, Andrea Orcel, has said he’s considering a takeover.
While Germany’s government opposes an acquisition, it has indicated there’s little it can do prevent a deal, and Commerzbank’s CEO-designate Bettina Orlopp will meet with UniCredit on Friday to discuss a way forward.
Commerzbank shares jumped almost 8% on Thursday, trading at the highest level in more than 12 years, as the lender pledged to increase profitability and pay out more money to investors.
The stock has soared about 30% since UniCredit first disclosed it had increased its stake.
--With assistance from Nicholas Comfort.
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