Italy's UniCredit doubles equity stake in Germany's Commerzbank to 20%

By Valentina Za, Tom Sims and Emma-Victoria Farr

MILAN (Reuters) -UniCredit increased its shareholding in Commerzbank to 20%, giving the Italian lender a bigger stake in the German competitor as it seeks to win over opposition to a possible takeover of the rival.

UniCredit converted derivatives representing around 10% of Commerzbank to shares, doubling its holding of stock in the German bank, according to a statement on Tuesday. UniCredit also holds derivatives for another 9%.

UniCredit first emerged as the biggest private investor in Commerzbank in September, meeting stark opposition from Germany to full takeover plans.

Commerzbank reacted by saying that UniCredit's move "has not been coordinated with Commerzbank" and that its results show "our business model of independence is working".

Defying Berlin, UniCredit increased its position in December by buying derivative contracts. It secured European Central Bank clearance earlier this year to get to a 29.9% holding.

The Milanese bank said it had converted into shares an around 10% Commerzbank stake which it had until now held in derivatives, getting to a roughly 20% voting stake.

"UniCredit plans to convert into shares its remaining synthetic position of around 9% in due time, getting to an around 29% voting stake in Commerzbank," it said.

The moves come after Chief Executive Andrea Orcel wrote to the new German government calling for talks over what UniCredit should do with the Commerzbank investment.

Orcel wanted to show with the share increase that he does what he says he will do, according to a person with knowledge of Orcel's thinking.

The timing is surprising, said a person familiar with Commerzbank's strategy, adding that Orcel may be positioning himself for a formal dialogue with the German bank and its stakeholders for a takeover, something he has been seeking.

Germany's Verdi labour union, long opposing any merger, said it would continue to fight it, calling UniCredit's latest moves "hostile takeover activities, not confidence-building measures".

Orcel has advocated a merger of Commerzbank and UniCredit's German unit HVB as the best outcome for all stakeholders, provided a deal has broad support from all relevant parties.

He has repeatedly said he could alternatively keep the Commerzbank stake as a financial investment, or sell it. 

In his most recent letter to the new German government, Orcel has said he wants to sit down with German authorities to find the best solution for all parties involved given UniCredit's Commerzbank investment, were Berlin to continue opposing a merger.

"UniCredit is Commerzbank's leading investor," it said in the statement on Tuesday.

(Reporting by Valentina Za; additional reporting by Tom Sims; Editing by Chizu Nomiyama, Daniel Wallis and Marguerita Choy)