UniCredit’s knack for clever deals proves unexpectedly costly
Andrea Orcel has taken an unhelpfully circuitous route to acquiring Commerzbank
Andrea Orcel became one of Europe’s best-paid bankers thanks to a reputation for being clever when it came to driving deals. The UniCredit chief’s approach to winning control of Commerzbank shows there’s a fine line between creative thinking and overthinking.
Orcel’s bid for his German rival has been anything but simple. UniCredit started quietly building a stake in Commerzbank back in 2023, then increased it with the help of derivatives contracts known as total return swaps. That was shrewd: UniCredit ended up with control over 29 per cent of Commerz’s shares, much of that acquired at a sharp discount to net asset value, and stole a march on any would-be rival bidders.
Rather than make an offer for the rest investors couldn’t resist, though, Orcel made one that a regular investor would have no incentive to accept. It is offering to exchange each Commerzbank share for just under half a UniCredit share, a deal which, at current prices, is a discount to Commerz’s market value.
Surprisingly, by the end of last week, around 12 per cent of Commerzbank shareholders had accepted UniCredit’s offer. Commerzbank has asked regulators to probe the situation, and says most of the support for the deal comes from banks “connected” to UniCredit. Several have been previously listed in filings as counterparties to the Italian bank’s total return swaps. UniCredit has recently reported further swap positions. It’s not inconceivable that counterparties might be incentivised to buy and tender Commerzbank shares to hedge their own positions.
In the short term, the tactic moves Orcel closer to winning control at a below-market price. But that could come at a cost. A victorious UniCredit would still have to manage its target’s 40,000 staff, millions of customers, a suspicious regulator and a very ticked-off government. Those aren’t insurmountable challenges, but the appearance of having won through cunning rather than generosity could be unhelpful. Domestic rival Deutsche Bank will no doubt be keen to snap up market share where it can.
What if UniCredit had just made a straightforward takeover bid back in 2024 around the time it first revealed a 21 per cent stake? The German government would have been reluctant, but with a rich price on the table and the bulk of independent shareholders in favour, that resistance would have been harder to sustain. After all, the European Central Bank wants to see consolidation. As things stand, UniCredit may have to pay a high price to buy shares that aren’t tendered, and doing so could be time-consuming.
Dealmaking is much easier in hindsight, of course. Orcel may feel that these intricacies are worth it in the name of creating a transnational European giant. But the situation is a reminder that sometimes, even in an industry as beloved of complexity as finance, the simplest path is the best.