Commerzbank rejects UniCredit' - Law of Divine Life

The German bank rejected the €39B bid, citing low valuation and serious risk to jobs.

Commerzbank AG’s board on Monday officially rejected UniCredit Bank SPA’s approximately €39 billion ($45.4 billion) takeover offer. In a 137-page assessment, the Frankfurt-based bank said the Milanese lender’s offer “involves considerable risk”, including long-term Russia exposure that could be a net “negative”.

At Commerzbank’s annual shareholder meeting on Wednesday, employees chanted “UniCredit go away!” Including raising anti-M&A slogans expressed support for the bank’s stance. CEO Bettina Orlop received applause after describing UniCredit’s offer as “an attempt to take over Commerzbank at a price that does not properly reflect the fundamental value and potential of our bank.”

Orlop’s speech in Wiesbaden, Germany, marked a decisive escalation in a months-long standoff over the future of one of Germany’s most politically sensitive companies, partly due to its ties to Russia. UniCredit has steadily built up a stake in Commerzbank over the past two years, starting with a 28% stake. The stake has since increased to 38.87%, The Wall Street Journal reports.

UniCredit’s non-cash offer of approximately €39 billion is structured as a share swap of 0.485 UniCredit shares for each share of Germany’s second-largest listed bank. Commerzbank officials said in a statement that UniCredit’s acquisition “offer does not offer a sufficient premium to our shareholders.”

Germany’s federal government holds a 12.7% stake in Commerzbank and is reportedly considering increasing it to 25%, a move that would give Berlin veto power. So far, it opposes any “hostile, aggressive takeover”, citing Commerzbank’s importance to the country’s financial system.

UniCredit, for its part, pushed back sharply this week. In a statement to Reuters, the bank said it disagreed with Commerzbank’s assessment and called parts of the analysis “unfounded or unsupported.” UniCredit CEO Andrea Orcel, a former Goldman Sachs, Merrill Lynch and UBS investment banker, said UniCredit would respond in more detail “in due course”.

While Orsel has argued that Commerzbank has performed poorly under Orlop’s leadership, Frankfurt and Berlin’s resistance highlights the limited appetite for sector consolidation. Commerzbank’s analysis warns that the takeover could lead to the cutting of more than 11,000 jobs.

Commerzbank shareholders are in the middle of a approval period, which started on May 5 and runs until July 3. UniCredit, which is required to publish weekly so-called acceptance level updates during the acceptance period, says only 0.0059% of Commerzbank shares have so far been offered under the offer as of May 12.