(Bloomberg) -- UniCredit SpA Chief Executive Officer Andrea Orcel said that a full takeover of Commerzbank AG is an option after announcing that it had acquired a 9% stake, a move that has jolted European banking.
“Conversations about an M&A or a further combination are on top” of current discussions around the stake, Orcel said in an interview with Bloomberg Television on Thursday. “We can engage constructively as to whether we all want to create something more than just the value that can be created by Commerzbank standalone.”
On Wednesday, UniCredit revealed that it had added all the shares the German government offered this week to a position it had quietly built in the market. The state is seeking to exit its stake in the bank it rescued after the 2008 financial crisis.
Orcel’s surprise move on Commerzbank could end up creating a new banking giant in Germany. The deal would be one of the region’s largest ever cross-border mergers but it faces substantial obstacles such as labor opposition. The German government still owns a larger stake than UniCredit, though it has started selling it down.
The executive signaled that the bank remains flexible with regard to what happens next. To go beyond 10% holding in Commerzbank UniCredit would need to seek authorization from the European Central Bank.
“There is the possibility the government sells down further and we would be interested at the right terms,” he said. “There is the possibility we buy in the open market, or there is the possibility that we do nothing.”
Click here to watch the full interview with Orcel.
European banking executives have long complained that the continent’s fragmented markets mean cross-border mergers are impractical. Yet record profits for some of the region’s biggest lenders, including UniCredit, over the past couple of years have re-ignited interest in deals. The Italian bank’s valuation has outstripped that of many peers, leaving Orcel in a comfortable position to consider potential targets.
Orcel has spent three years scouting for a transformational deal for UniCredit, which he once advised on deals and now runs. He is now sitting on as much as €10 billion for potential acquisitions, having reaped the benefits of higher interest rates while cutting costs. The CEO has said that he’s constantly looking at possible deals in markets where UniCredit operates, though valuations and conditions have to be right.
The next step for the chief executive is to engage with stakeholders in Commerzbank “and see if the basis for a combination is there,” he said. He signaled that he’s prepared to walk away if need be.
“We may go up, we may go down, and we may combine,” Orcel said “We are very patient.”
During the summer, as speculation that the German government would reduce its stake mounted, he decided to build a stake as the pricing was attractive, he said.
Orcel is already facing some resistance. The German government has expressed little enthusiasm for a merger, and labor union Verdi on Wednesday called on officials to stop the sale of any more shares in Commerzbank immediately. Under stock market rules, Germany can’t sell any more stock anyway for at least three months.
“We have always entertained a dialog with regulators, institutions and counterparts in Germany,” Orcel said. “I would have thought all the relevant stakeholders were well aware of what we were doing and we would not have moved otherwise.”
The ECB was also kept informed as early as the summer, Bloomberg reported on Wednesday.
Adding Value
Known as a dealmaker, Orcel made his first large acquisition as UniCredit CEO last year by agreeing to buy the Greek state’s holding in Alpha Bank and acquiring Alpha’s Romanian unit. In July, UniCredit agreed to buy Polish banking services provider Vodeno and Belgian digital bank Aion Bank SA.
“We think there is space given fragmentation of the market to add further value by consolidating,” he said. “If there is the basis to do that constructively and strengthen what we can provide to the German economy and Europe than that is a great move for UniCredit.”
--With assistance from Noele Illien.
(Updates with further quotes from Orcel)
©2024 Bloomberg L.P.
