Commerzbank CEO says takeover by UniCredit can create value
Commerzbank and UniCredit: The Path to Value Creation
By Tom Sims, Valentina Za and Jörn Poltz
Background of the Takeover
FRANKFURT, Aug 6 (Reuters) - Commerzbank's Chief Executive Bettina Orlopp said on Thursday a tie-up with UniCredit could create value for both sides, in a significant shift of tone as she looks to direct talks with her counterpart Andrea Orcel.
Germany's second-biggest bank has been a fierce opponent of UniCredit's overtures, but after a nearly two-year battle to fend off the Milan-based lender it has given up the fight in recent weeks as UniCredit last month secured a 48% stake in Commerzbank, giving it effective control.
Initial Opposition and Recent Developments
Orlopp said on Thursday Commerzbank had begun talks with UniCredit and that she was "optimistic" both sides could find common ground.
However, Orcel, the architect of one of the most contentious European banking battles in decades, has said he wants to negotiate directly with the German government, which has criticised UniCredit's aggressive attitude and owns around 12% of the bank, and with Commerzbank employees, bypassing management.
The format of the talks is not clear, but Orlopp's conciliatory tone precedes months of likely negotiations as UniCredit waits for regulatory approvals to be declared in control of Commerzbank , and when and how it will try to buy the rest of the bank it does not own.
Negotiations and Strategic Discussions
Leadership Meetings and Pre-Merger Plans
Orlopp and Orcel met on the sidelines of a private event in July, a source close to UniCredit said. The two discussed accounting measures and other steps related to UniCredit's taking control, the person said, adding it "was not the start of any negotiation."
After seeing through a €45 billion ($52 billion) hostile takeover bid for Commerzbank helped by a skilful use of derivatives, UniCredit has outlined pre-merger plans it wants the Frankfurt-based lender to follow to boost profits.
Commitment to Value Creation
'DETERMINED TO CREATE VALUE'
"We have started talks on this, which is in the genuine interest of both UniCredit and Commerzbank, as we are both determined to create value for our shareholders, clients and employees," Orlopp told analysts.
"I'm optimistic that, step by step, we can find common ground on governance and also on the business model."
Past Talks and Roadmap for the Future
Orlopp and her management team had long been opposed to a tie-up with UniCredit. There have been several rounds of talks but all have ended in disagreement.
Orcel said UniCredit has laid out a roadmap it wants in place from January and is ready to call an extraordinary shareholder vote to appoint a new supervisory board at Commerzbank if necessary.
UniCredit and Commerzbank have been holding post-earnings investor meetings since the Milanese lender became a shareholder. Thursday also offered an opportunity for both management teams to exchange views in an investor call.
Potential Synergies and Challenges
Cost Savings and Investment Programs
Orlopp said on Thursday it was in the best interest of both banks to move as quickly as possible and that they would try to identify possible cost savings and whether the banks could join forces on large investment programmes.
A Commerzbank presentation also showed the company's increasing willingness to work with UniCredit on a deal since the Italian bank built its 48% stake in the German lender.
Management Involvement and Stakeholder Alignment
Orlopp said UniCredit, even with that large stake, needs to work with her management team on a path forward rather than act unilaterally on any structural changes.
"It requires a shared understanding of the business model and the involvement of all stakeholders," she said after Commerzbank reported a 94% jump in second-quarter net profit to €898 million, helped by stronger commission income.
The earnings beat analyst expectations of €845 million in a consensus forecast published by the bank.
Strategic Differences and Government Role
A person familiar with UniCredit's thinking said before the results announcement that the Italian suitor was watching to see if Commerzbank shifts focus to Germany and away from international lending and trading, exposing a difference in opinion on strategy.
Commerzbank has said its international network is key to its strategy.
The German Finance Ministry, which oversees a 12% stake that the government has held since Commerzbank's bailout during the global financial crisis, said through a spokesperson that it was up to the two banks to discuss how to proceed and criticised UniCredit's "aggressive approach".
German opposition to Orcel's overtures has been widespread, underscoring the difficulty of merging large banks across euro zone countries to help them compete with bigger U.S. rivals.
Additional Information
($1 = 0.8662 euros)
(Reporting by Tom Sims, Valentina Za and Joern PoltzAdditional reporting by Christian KraemerEditing by Linda Pasquini, Tom Hogue, David Goodman and Andrei Khalip)
