UniCredit CEO says ECB likely to decide Italian bank has Commerzbank control
By Valentina Za and Tom Sims
UniCredit's Takeover of Commerzbank and ECB Implications
ECB's Potential Ruling on Control
MILAN, June 23 (Reuters) - UniCredit CEO Andrea Orcel said on Tuesday it was more likely than initially expected that the European Central Bank would declare the Italian bank in control of Commerzbank, given how much it owned after its takeover offer.
"At the moment it is a lot more probable that we end up with what the ECB would call control than not," Orcel told the annual Mediobanca CEO conference in Milan.
Minority Holding Rules and Capital Impact
Due to minority holding rules, merging its accounts with those of Commerzbank without majority ownership would cost UniCredit 40% more in terms of core capital.
"We never launched this offer to go to control. Now we are in a situation where we might," Orcel added.
Background of the Takeover Offer
Italy's UniCredit said when it launched a voluntary exchange offer for Commerzbank shares on May 5 that it simply wanted to nudge its 27% stake above the 30% mandatory takeover threshold and be able to freely buy more on the market next year.
The offer, which carried a very modest premium, concluded on June 16 with a 12.5% take-up, handing UniCredit 42.5% of Germany's Commerzbank.
Shareholder Control and ECB Review
At this level, UniCredit will be able to determine the outcome of shareholder resolutions, prompting the ECB, which is reviewing the matter, to declare it in control of Commerzbank.
Orcel had earlier expressed confidence UniCredit would be able to avoid a situation of control without majority ownership because of the capital hit.
UniCredit's Strategic Considerations
The CEO is keen to preserve UniCredit's capital reserves to keep up its payout policy and for consolidation in Italy.
UniCredit was "an observer" in this at the moment and could not see a good opportunity, Orcel said, with potential targets trading at a 30% to 35% premium to UniCredit's market value.
Take-Up Data and Market Reactions
Acceptance Data and Use of Derivatives
TAKE-UP DATA
Opposed by Commerzbank and the German government, the offer has been marked by recriminations over acceptance data and UniCredit's use of derivatives.
Commerzbank has said the shares have been tendered by banks, not institutional investors, and in most cases banks that were UniCredit's swap counterparties.
Institutional Investor Response
Orcel said that, when excluding passive investors as they cannot sell, all institutional Commerzbank investors except five had either tendered or sold their shares.
"Which fundamentally indicates that people think that this price is opportune," Orcel said.
Commerzbank's Statement on Take-Up
Commerzbank reiterated in a statement its view that the take-up was not proof that the market liked the bid.
"We confirm that institutional and retail investors have only contributed around 1% of the tendered shares, reflecting (that) the offer does not represent the value of Commerzbank as seen amongst others by independent market research," it said.
Reporting Credits
(Reporting by Valentina Za, editing by Giulia Segreti and Alexander Smith)
