UniCredit won't participate in Commerzbank shareholder meeting, sources say
UniCredit's Position and Strategic Considerations Regarding Commerzbank
Background of UniCredit's Stake in Commerzbank
FRANKFURT, May 19 (Reuters) - UniCredit will not participate in Commerzbank's annual shareholder meeting on Wednesday, two people familiar with the matter told Reuters, opting for a passive role even as it battles for eventual control of the German lender.
UniCredit has become Commerzbank's largest shareholder with a stake of nearly 30%. It officially launched a bid to raise its stake in the German lender to just above 30% early this month. Commerzbank formally rejected the all-share bid on Monday and urged its shareholders to do the same.
Official Statements and UniCredit's Response
UniCredit declined to comment on whether it would skip Wednesday's meeting.
In April, its CEO Andrea Orcel said the Italian lender had not yet decided whether it would participate in Commerzbank's annual meeting, though he hinted that the Milanese bank was likely to keep away from it.
Regulatory and Financial Implications
Concerns Over Control and Capital Impact
UniCredit has said it is keen to avoid being declared in control of Commerzbank under German laws if it participates in the meeting, even without owning more than 50% of the lender.
Potential Capital Consequences
Doing so would result in it suffering a major capital hit as it would be forced to consolidate its minority holding in Commerzbank on its books and set aside additional capital in what would be a costly move for the Italian bank.
Details of UniCredit's Holdings
UniCredit directly holds 26.7% of Commerzbank as shares and owns swap contracts that could hand it a further 3.2% of the German bank's voting share capital, regulatory filings show.
It also owns swap contracts on a further 8.9% of Commerzbank's capital, but those derivatives can only be settled in cash.
Strategic Use of Derivatives
The derivatives give UniCredit the possibility of increasing its Commerzbank stake but they would also help it to unwind the position if necessary, two other people close to the matter said.
Outlook and Investor Communication
Orcel has told investors he is confident he will be able to avoid a situation in which regulatory supervisors declared UniCredit in control of Commerzbank with less than 50% plus one share, without clarifying which steps the bank could take.
(Reporting by Tom Sims and Valentina Za; Editing by Ludwig Burger, Thomas Seythal and Emelia Sithole-Matarise)
