(Bloomberg) -- If UniCredit SpA Chief Executive Officer Andrea Orcel thought victory for the business-friendly conservatives in next week’s German election might smooth his path to taking control of Commerzbank AG, he seems to have been mistaken.
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At a closed-door BlackRock Inc. event in Davos last month attended by global banking heavyweights, Friedrich Merz, whose center-right CDU/CSU alliance has a big lead in the polls, made clear in private what he had been publicly saying for some time: he wants Germany’s second-largest lender to remain independent.
According to people present at the gathering on the sidelines of the World Economic Forum, host Larry Fink, whose investment firm oversees a stake of about 7% in Commerzbank, was debating the challenges of Europe’s banking union with Merz. An audience member then pressed the CDU leader — a former supervisory board chairman of BlackRock’s German unit — on his policy regarding the Frankfurt-based lender, said the people, who asked not to be identified discussing a private meeting.
His rejection of UniCredit’s move on Commerzbank showed his public statements weren’t just political bluster and it’s one of the few areas where he agrees with Chancellor Olaf Scholz’s Social Democrats. It was also a reality check for those in the Italian camp who hoped a Merz-led government could pave the way to completing the deal.
Commerzbank has been struggling to hold on to its independence since September, when the government’s decision to offload about a quarter of its 16% stake — a leftover from the 2007-08 financial crisis — unexpectedly backfired.
UniCredit snapped up the tranche on sale and then built that holding up to 28%, setting off one of Europe’s most contentious takeover battles.
Orcel aims for full control, even though opposition in Berlin has raised serious obstacles. He told Bloomberg this week he’s confident he’ll ultimately convince Commerzbank’s stakeholders that a takeover would be good for Germany and said he plans to decide at the end of this year or early next year whether to launch a formal offer.
Merz, the likely next chancellor, still sees divestment of the government’s remaining stake as the right strategy, according to an official from his party, adding that a CDU/CSU-led government won’t hold on to the remaining 12% tranche solely to block a potential UniCredit bid.
At the same time, it would fully exploit its shareholder rights after the election, said the official, who spoke on the condition of anonymity. And even if it were to sell more shares, its remaining stake would allow it to be a prickly investor.
Commerzbank is determined to fight. Chairman Jens Weidmann, a former Bundesbank president, is a staunch proponent of the lender’s independence, along with CEO Bettina Orlopp — though she has said she would have to study any takeover offer before deciding whether to support or reject it.
Asked if she believed Merz would back the lender, Orlopp said last week at a Bloomberg event that “all party leaders have publicly stated their support” for its effort to remain independent.
It’s also possible that after Merz secures the chancellery, he may take a tougher stand against UniCredit than the current government, according to people familiar with his deliberations, who asked not to be identified.
That might entail seeking a new anchor shareholder to counterbalance the Italian lender’s growing influence, said the people, adding that potential investors are already quietly exploring their options.
Sovereign wealth funds cautiously inquired about Commerzbank’s status in talks with German Finance Minister Joerg Kukies — who was also at the Davos gathering — during his trip to the Middle East this month, according to people who were part of the minister’s entourage.
Former Commerzbank CEO Manfred Knof had already sounded out interest from investors in the region before his exit last year.
A Commerzbank spokesperson declined to comment on the impact of the German election, referring instead to Orlopp’s remarks. Spokespeople for UniCredit, Merz’s CDU party and the finance ministry also wouldn’t comment.
Regional rivalries may also play a part: Commerzbank, which employs about 42,000 people, is based in Frankfurt in the state of Hesse, while UniCredit’s German subsidiary HypoVereinsbank, with about 9,600 staff, is in Munich.
That pits the current and former premiers of Hesse — Boris Rhein and Roland Koch — against their Bavarian counterpart Markus Soeder.
All three men are influential politicians in Merz’s bloc — the first two in his party, the latter as head of the CDU’s smaller sister-party in Bavaria, the CSU.
Soeder has been fairly silent on the threat of potential job losses in Munich that would result from the Italian bank’s plan to merge Commerzbank with HVB.
That’s possibly because his state would still profit from the takeover if a merged entity were headquartered in the Bavarian capital instead of Frankfurt, according to a person familiar with the situation.
Beyond internal party dynamics and regional affairs, Merz harbors fundamental concerns about a UniCredit acquisition, the people said.
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The lender’s exposure to Italian sovereign debt is seen as a potential risk that could spill over to German savers and companies if Prime Minister Giorgia Meloni’s government finds itself in the crosshairs of the financial markets.
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The CDU leader considers it essential for Germany to maintain at least two major national banks with global reach.
Besides Deutsche Bank AG, the country’s biggest lender, Commerzbank says it services more than 30% of Germany’s small and mid-sized companies, helping them finance their export-oriented business models.
Still, despite the unusually broad political resistance against the takeover, Orcel might be able to convince Berlin to tone down its opposition and start a new dialogue.
--With assistance from Arne Delfs, Arno Schütze, Eyk Henning, Sonia Sirletti, Tom Mackenzie, Ben Priechenfried, Jeremy Diamond and Christian Baumgaertel.
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