New UniCredit CEO Andrea Orcel has stated unequivocally that the bank will not be making a merger bid for Commerzbank. He added that they are now “very distant” from that decision. He urged negotiating a “constructive solution” ahead of time. Before even seeking approval for any acquisition, UniCredit will have to address the lingering objection from the German government. Shouldn’t that be the undercurrent behind the recent spate of meaningful Commerzbank financial results? Its net profit exploded by 29% in that same first quarter, beating analysts’ expectations.
Orcel acknowledged that despite Commerzbank’s stellar results, the sky-high share price in itself is an immense hurdle. He claimed that at today’s valuation, UniCredit does not view itself as finding value for its shareholders in a merger agreement. “At this level, we would not see value for our investors. Actually, we would not, we are very happy for the gain we’ve had on the 30 level, but we wouldn’t see value for our investors,” Orcel remarked during an interview with CNBC.
Commerzbank’s share price has shot up an incredible 76% year-to-date, fueling takeover speculation even more. That rush has driven the shares “far ahead of the fundamentals,” in Orcel’s words. He added that there is a lot of “buying the stock” going on, which is a way to keep up the high share price. Despite these obstacles, Orcel painted an upbeat picture of UniCredit’s appetite – or lack thereof – for a possible merger.
Commerzbank and the Berlin administration have long resisted UniCredit’s wish to buy out the German bank. This opposition has continued to be strong since the very start of UniCredit’s proposal. Friedrich Merz, leader of the country’s main opposition party, has been one of the loudest voices attacking a unilateral bid style from UniCredit. He stated that “an uncoordinated and an unfriendly approach such as that of UniCredit is unacceptable,” while emphasizing the importance of “relying on a strong and independent Commerzbank.”
This week Italian bank UniCredit is facing some public opposition to its takeover bid for fellow Italian UniCredit Banco BPM, another Italian peer. This further complicates the picture. This split in strategy complicates UniCredit’s challenge of pursuing Commerzbank exclusively. As a consequence, questions are being raised about its real seriousness about a possible buyout.