Commerzbank readies talks with UniCredit but remains defensive
UniCredit snapped up stake, eyes takeover
Commerzbank's CFO set to lead talks
German lender opposes tie-up
Adds detail, background
By John O'Donnell and Tom Sims
FRANKFURT, Sept 18 (Reuters) -Commerzbank CBKG.DE is poised to put CFO Bettina Orlopp in charge of talks with UniCredit CRDI.MI when the German bank's supervisory board meets next week, two people with knowledge of the matter said, as the Italian rival eyes a takeover.
UniCredit recently bought a 9% stake in Commerzbank, expressing interest in a merger. The meeting next week would pave the way for exploratory talks between the two to begin.
UniCredit's swoop is the most ambitious attempt yet at a pan-European bank merger but it faces considerable political hurdles in Germany ahead of national elections, not least from trade unions fearing a jobs cull.
Commerzbank is entering the discussions as it is duty bound to shareholders to do so, although the bank's management remains opposed to a takeover by the Italian lender, one of the people said.
The decision to have Orlopp lead the talks could come as early as Tuesday, when Commerzbank's supervisory board and management begin two days of meetings near Frankfurt to discuss the group's strategy and response to UniCredit, the people said.
Commerzbank declined to comment.
The bank's chief executive Manfred Knof announced he would step down as CEO at the end of 2025 just hours before UniCredit revealed its stake, raising questions about whether he was able to lead talks. He has snubbed overtures for a takeover.
Commerzbank, with more than 25,000 business customers, almost a third of German foreign trade payments and more than 42,000 staff, is a linchpin of the German economy, Europe's industrial motor.
The Italian takeover interest has already prompted a backlash and is an embarrassment for the German government, which appeared to have sold part of its stake without realising that UniCredit would snap it up.
LONG-STANDING INTEREST
UniCredit first approached Berlin to flag its interest in a takeover of Commerzbank in 2017 and considered a competing bid for the German lender again in 2019, when Commerzbank was discussing a tie-up with Deutsche Bank.
In 2019, one source told Reuters that it envisaged fusing the banks but keeping UniCredit's headquarters and listing in Milan.
In 2022, UniCredit CEO Andrea Orcel approached Knof about a potential deal, before the Ukraine war, people with knowledge of the matter have told Reuters.
Again, roughly a year ago, UniCredit expressed interest in the government's stake but Berlin never entered into discussions, one of the sources said. The bank declined to comment.
When Orcel returned this month to snap up the stake, it caught German government officials off guard, several people with knowledge of the matter told Reuters.
One German government official said that the government had not intended to sell the shares to a strategic investor like UniCredit and had expected the stock instead to be snapped up by multiple buyers.
Commerzbank immediately set about persuading the government not to sell more of its remaining 12% stake to avoid a complete takeover by UniCredit, one of the people said.
That person said any takeover could undermine the flow of credit to German companies by preoccupying the bank in complex merger talks as well as exposing Germany to debt risks in Italy by tying Commerzbank to UniCredit.
GERMAN CONUNDRUM
Late on Wednesday, Orlopp weighed in on what the government should do with its remaining stake, calling for it to hold on to it.
"We have all been very surprised by the process," Orlopp told journalists in Berlin. "That's why the most important thing now is simply to sort it out calmly, to think about what's on the table now and how to deal with it."
Orlopp, as Commerzbank's finance chief and deputy CEO, is one of Germany's highest profile bankers.
She assumed her current role in 2020 during another tumultuous period for the bank - when the U.S. investor Cerberus, a major shareholder at the time, revolted and pressed for changes in the bank's strategy and management.
Government officials, meanwhile, were annoyed by the surprise stake build and put further selling of the state's remaining holding on ice, another person with knowledge of the matter has said.
At home, Italy is keeping its distance from UniCredit's German foray, according to some government officials.
Orcel walked away from buying Monte dei Paschi at the eleventh hour in 2021, forcing the government to seek more time from the EU to return the bank to private investors, hurting relations with the bank.
While Rome is in favor of the creation of a large European banking group based in Italy, there are no political initiatives by the government at present to support Orcel, a senior official told Reuters.
The discussions about a takeover are unfolding at a delicate time for Germany. The coalition government, one of the most unpopular in recent history, is preparing for national elections next year.
Strong recent gains for the right-wing Alternative for Germany (AfD) and the left-wing BSW are squeezing the three-party government.
That pressure is strongest on the smallest member of that coalition, the liberal FDP party, which runs the finance ministry, responsible for the stake sale.
Reporting by John O'Donnell and Tom Sims; additional reporting by Giuseppe Fonte in Rome and Andreas Rinke Christian Kraemer in Berlin; editing by Elisa Martinuzzi, Rachel More, Elaine Hardcastle and Christina Fincher
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