(Bloomberg) — UniCredit SpA spoke with German officials about building a stake in Commerzbank AG before Berlin began selling its shares in the company earlier this month, adding to confusion over Germany’s position that it was unaware of the move.
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According to insiders, UniCredit officials expressed their interest after Germany announced on September 3 that it would conduct a share sale and before the execution on September 10.
Some people, who wished to remain anonymous about the confidential information, said those conversations did not take place at the highest levels of the German government.
A spokesman for UniCredit declined to comment. A spokesman for the Italian Foreign Ministry declined to comment.
A German Finance Ministry official said UniCredit, along with other investors, expressed interest in the sale on Sept. 4 and were referred to the financial agency. There were no further announcements from the Italian company about bids and further plans regarding Commerzbank, nor were existing shareholdings or derivative instruments disclosed, the official said.
The manner in which UniCredit quickly acquired a large stake in Commerzbank has become a politically tense issue, threatening to strain relations between Berlin and Rome. While Germany has said it was surprised and criticized the way UniCredit bought the shares, the Italian government and the bank’s CEO, Andrea Orcel, have defended the move, with the CEO calling it a “test case for Europe” on Wednesday.
Orcel used the government sale to buy a 4.5% stake in Commerzbank, adding it to a similar holding he had been quietly building up earlier, partly through derivatives. He later increased his beneficial ownership to around 21% by buying more financial instruments, effectively making UniCredit the largest shareholder, ahead of Germany.
Berlin has said it was surprised by the move. German Chancellor Olaf Scholz, who has come under fire from opposition parties over the situation, has called UniCredit’s actions “unfriendly”. The government has also said it is suspending further share sales of Commerzbank, with Finance Ministry Christian Lindner explicitly linking the decision to the “style” of the Italian bank’s approach.
Orcel has said the German government was aware of his intentions regarding Commerzbank and should not have been surprised when UniCredit made a bid for the country’s stake in the lender. He also said on Wednesday that there had been contacts between UniCredit and “interested parties” prior to that sale.
UniCredit’s communications with the German government earlier this month came in addition to feelers put out over the past year as representatives of the lender — including Orcel itself — expressed interest in Commerzbank, the people said. Some of those meetings were between Orcel and German government officials from the chancellery and finance ministry, and were facilitated by the Italian embassy in Berlin, the people said.
The German government saw the contacts as broad approaches and was surprised when UniCredit bought the stake, the sources said. Berlin did not know that Orcel had already built up a stake in Commerzbank in the weeks leading up to the sale and targeted the placement at financial investors who would each buy a small part.
The morning of the sale, the investment bank handling the transaction, JPMorgan Chase & Co., was canvassing potential investors — including UniCredit as the sole strategic investor — because it had been flagged by the German side that the Italian lender had previously indicated its interest, one of the people said. JPMorgan also informed the German side on Sept. 10 that UniCredit had built a stake before the formal start of the sale process, one of the people said.
The government agencies overseeing Commerzbank’s stake and its sale — the German Finance Ministry and the Federal Reserve Bank — were reluctant to engage with potential investors after announcing the sale plan, the sources said. Instead, they referred interested parties to JPMorgan, fearing that the contacts could be seen as favoring some investors over others in violation of European Union rules.
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