Germany Rejects UniCredit's Hostile Bid for Commerzbank

Germany, a 12% shareholder in Commerzbank, has rejected the hostile public exchange offer (OPS) launched by UniCredit, opting to preserve the German bank's independence and denouncing what it deems an "aggressive" approach by the Italian group.

The decision was announced in a statement by the German Finance Agency (Finanzagentur), which manages the state's stake in Commerzbank. Accepting the offer was already described as "economically out of the question", the note said, since the bid does not include an adequate premium over Commerzbank's current share price.

The deal is politically sensitive in Germany, where the federal government remains the second-largest shareholder in the Frankfurt-based bank, a stake inherited from the 2008 financial crisis. Beyond financial considerations, Berlin is emphasising the operation's strategic implications.

Commerzbank "plays a key role in financing the German economy and the Mittelstand, the backbone of small and medium-sized exporting companies**,** and is a major employer and a crucial pillar of the Frankfurt financial centre", which the government intends to preserve, the statement reads.

The German business daily Handelsblatt has reported that as recently as Monday UniCredit is said to have threatened, if it secured sufficient support at the shareholders' meeting, to move to replace Commerzbank's supervisory board and management board.

The bank is then reported to have involved the financial watchdog, the Bundesanstalt für Finanzdienstleistungsaufsicht (Bafin), accusing UniCredit of relying on shares coming mainly from banks with which it has commercial ties via derivatives, rather than from independent shareholders.

UniCredit is understood to have firmly rejected these criticisms, and has proposed slimming down the international network of Commerzbank, which it considers overly complex and inefficient, in order to refocus the bank on its activities in Germany.

UniCredit has also said it has surpassed the 30% threshold it had set for the OPS, having launched the offer when it already held almost 27% of the German bank's capital.

How the market reacted to UniCredit's offer for Commerzbank

UniCredit shares posted one of the strongest gains on the FTSE Mib, rising 3.71% to 77.34 euros despite the German government's "no" to the offer and its decision not to tender its shares.

In the early afternoon of Tuesday 16 June UniCredit will publish the latest daily update on the level of acceptances, followed on Friday 19 by the final figures for the first offer period (which will include the shares tendered this afternoon and evening).

From 20 June to 3 July, a supplementary period will open during which shareholders who have not yet taken part will be able, if they wish, to change their minds and tender their shares. The final figures will then be published on 8 July. Yesterday acceptances had reached 11.91% of the capital.

Total potential exposure, including derivatives, stands at 55.09% of the capital (57.47% of the voting rights). Looking only at the physical shares held and the acceptances to the OPS, the stake is 38.68%; adding a physically settled derivative, it rises to 41.9%. UniCredit's target was to exceed 30% of Commerzbank's capital.