By Valentina Za and Tom Sims
MILAN (Reuters) -UniCredit met renewed German opposition on Wednesday to its takeover ambitions for Commerzbank after it doubled its voting stake in the rival, pending an Italian court ruling on its bid for domestic target Banco BPM.
After years of record profits boosted by high interest rates, Italian banks have embraced consolidation, with almost a dozen takeover bids currently unfolding or concluded in recent months. With interest rates declining, banks need to cost cuts to support profits and sustain rising IT investments.
Unicredit, which also faces resistance to its growth plans at home, late on Tuesday said it had doubled its equity and voting stake in Commerzbank to around 20% by converting derivative contracts. It said it also plans to convert the remaining 9% it holds in derivatives without specifying when.
Germany’s finance ministry on Wednesday reiterated the government’s rejection of UniCredit’s “uncoordinated and unfriendly” approach, ruling out a sale of the state’s remaining 12% stake in Commerzbank.
“The federal government supports Commerzbank’s strategy of independence. The federal government has already made this very clear to UniCredit,” the spokesperson told a news conference.
UniCredit CEO Andrea Orcel has sought meetings with the German government to discuss a possible combination of Commerzbank with UniCredit’s German unit HVB.
The deputy chair of Commerzbank’s supervisory board, Sascha Uebel, said UniCredit’s move was not surprising, but increased his resolve.
“It doesn’t change my opinion, except that I’m perhaps a little more determined than last week,” he told Reuters.
COURT ACTION
While the German government has no effective legal tools to block UniCredit’s expansion plans, Italian laws give Rome power to block, or set conditions for, deals affecting strategic assets on national security grounds.
It has used them to complicate UniCredit’s bid for BPM, which the Treasury had hoped to combine with state-backed Monte dei Paschi di Siena.
In response, UniCredit has asked a court to annul the conditions Rome set in April, saying they would be detrimental to the sound management of the combined bank.
The court heard the appeal on Wednesday and must publish its decision by July 16, although it is expected to make it public earlier.
“I never thought I’d come to this,” UniCredit lawyer Fabio Cintoli told reporters after the hearing, quoting in English a line from the musical “Jesus Christ Superstar” to describe Italy’s use of special powers to set terms for the deal.
Orcel has secured European Central Bank approval for the Commerzbank investment. It could also get support from the European Commission, which has raised concerns over Italy’s interference in banking deals.
European Union authorities are in talks with their Italian counterparts, but a formal disciplinary step to challenge Rome’s stance, paving the way for eventual possible fines, is not imminent, three people close to the matter told Reuters on condition of anonymity.
An European Commission spokesperson said on Wednesday Brussels was “working as fast as possible” and was aware the offer for BPM ran to July 23, adding, however, there were no deadlines for a decision.
“Member states may only impose restrictions to fundamental freedoms, including the freedom of establishment and free movement of capital, if such restrictions are proportionate and based on legitimate public interests,” the spokesperson said.
Shares in UniCredit were up 3.6% at 1227 GMT. Commerzbank’s fell 0.9% and Banco BPM’s were up 1.9%.
Orcel’s other steps to make use billions of euros from selling assets and cutting costs, have included in May doubling a stake in Greece’s Alpha Bank. UniCredit has also built a stake in Italian insurer Generali, but Orcel has said he will gradually sell it.
(Additional reporting by Giuseppe Fonte and Christian Kraemer. Editing by Edwina Gibbs, Mark Potter and Barbara Lewis)
