Berlin mulls extravagant measures to stall takeover attempt on top bank

Berlin is contemplating the use of executive powers to stall an Italian bid to take over one of its most important banks that appeared to regain momentum early Wednesday, according to a briefing note seen by POLITICO.

Italy’s second-largest bank, UniCredit, said Wednesday morning it had indirectly increased its stake in Commerzbank through derivatives to around 28 percent, reviving the prospect of an all-out takeover. 

The pushback comes as UniCredit sows panic in Europe more broadly, following a series of hostile moves against major banks that sparked a cross-border bidding war and drew in both Berlin and Rome.

Already angered by the Italians’ initial advance in September, there is evidence that the German government is now preparing to back its words up with action, using national security clauses in domestic legislation, as well as broader antitrust law, to thwart a full takeover. A briefing note distributed in government circles and shared on Wednesday with POLITICO highlighted two main ways in which such defenses could be activated.

In the first instance, the note advanced the argument that Commerzbank represents a vital national security interest as a supplier of credit to the defense industry, a sector that the German government is suddenly having to prioritize again after 30 years of neglect.

As a second line of argument, it suggested that UniCredit — despite being registered and listed in Italy — could be classified as a non-European entity because half of UniCredit’s shares are held by entities based in the U.S. or U.K.

More outlandishly, the note ventured that a takeover could get extra EU scrutiny via a foreign subsidies review because UniCredit had benefited for years from effective subsidies through a low tax rate on its activities in Russia.

On Wednesday, the German government lashed out publicly at the move, casting it as a creeping, hostile takeover of an essential source of credit to German companies.

“We reject UniCredit’s unsolicited and unfriendly approach,” a government spokesman told a press conference, “all the more so because Commerzbank is a systemically-relevant bank. Unfriendly attacks and hostile takeover are not appropriate in the banking sector.”

Inch by inch

Whether Berlin likes it or not, UniCredit is encroaching steadily.

In a statement Wednesday, the bank said it now holds a 9.5 percent stake in Commerzbank directly and 18.5 percent through derivatives contracts, having upped its stake to 21 percent earlier this year. Andrea Orcel, UniCredit’s hard-driving chief executive, said last month that he would wait before the outcome of the German election next year before raising the stake beyond 30 percent, which would trigger a formal takeover bid.

Acquiring a stake in excess of 10 percent and below the takeover threshold requires regulatory approval. UniCredit has filed with the German regulator, Bafin, and the European Central Bank, which is now reviewing the request, having taken it on from Bafin at an unspecified earlier date, according to a person familiar with the matter. The ECB is obliged to conclude its review within three months of its initiation.

The Commerzbank move runs in parallel to an equally contentious attempt by UniCredit to take over Milan-based lender Banco BPM, which has sparked a convoluted series of bids and counter bids. 

Rome, like Berlin, has also considered the use of executive powers to contest that move, expressing concerns — internally and in public — that it could jeopardize a long-planned merger between BPM and the Tuscany-based Monte dei Paschi di Siena, which the Italian government finally managed to sell a chunk of in November. 

This story has been updated.