The gloves are coming off in Europe’s biggest banking takeover

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Orcel’s move is viewed more favourably in Rome, which is open to moves that strengthen the Italian banking sector and bring closer ties to the German market, people familiar with the matter have previously said. The step also is seen as keeping Orcel’s dealmaking focus away from the domestic market.

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Commerzbank’s leadership, meanwhile, argues that its turnaround is gaining traction and that a deal would undervalue its prospects. Orlopp has rallied employees around her standalone strategy, allowing her to quickly cut jobs, boost profitability and lift investor payouts.

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Shares of the lender have gained around 190 per cent since news of UniCredit’s approach first broke in September 2024, compared with 88 per cent for UniCredit, although the Italian lender still has a superior price-to-book ratio. While Commerzbank’s share rally makes an acquisition more expensive, it has allowed UniCredit to book gains on its stake, underscoring the comfortable position Orcel finds himself in.

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In the latest twist to his years-long chase, Orcel last month unveiled a bid for the remainder of Commerzbank’s shares, though with almost no premium. The offer is expected to push UniCredit’s stake beyond 30 per cent, the level that would require it to make an all-out bid under German law, while stopping short of outright control. The idea, instead, is to give Orcel flexibility to push for change and potentially buy more shares in the market.

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Speaking at a Morgan Stanley conference in March, Orcel described the bid as a tactical step aimed at breaking what he called an “uncertain,” “abrasive” and ultimately “suboptimal” stalemate that has dragged on for months. Even if no deal emerges, the process would still be a “win-win” by clarifying positions after months of limited progress.

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The breakdown of talks with Orlopp suggests that, for now, the disagreements between both sides have only deepened. Commerzbank said on April 7 that the hostile nature of the approach made it “difficult to build the mutual trust necessary for a successful transaction.” It plans to announce increased financial targets along with its results for the first quarter on May 8.

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Orcel hit back on Monday with a stinging criticism of Orlopp’s strategy, which he said suffers from “structural weaknesses” that are only “masked by financial tailwinds.” Commerzbank should focus on Germany and Poland and scale back its international operations, he said as he outlined various outcomes for the takeover bid, which is set to start early next month and run for four weeks.

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The most likely near-term scenario, according to the executive, is that UniCredit ends up with a stake of around or just above 30 per cent, without control. In that case, it would remain a significant shareholder but take a more proactive and public role in pushing Commerzbank toward what it sees as stronger growth, better risk discipline and improved margins.

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The scenario could be complicated if regulators decide that UniCredit already has de-facto control, even if it’s shy of 50 per cent, because typically not all shareholders exercise their voting rights. The lender is in talks with the European Central Bank over that issue, which could result in a more onerous capital treatment for its stake in Commerzbank, people familiar with the matter have said.

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A second scenario would see UniCredit move into a controlling position, with execution led by its German unit HVB, while the most ambitious outcome remains a full combination. In the latter scenario, the combined entity’s net income could hit around €21 billion in 2030, UniCredit said on Monday.

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Whatever the outcome of UniCredit’s offer, the standoff raises the prospect of a more confrontational path going forward, with UniCredit’s proposals effectively turning it into an activist investor. Orcel could also use incremental stake building, a later delisting offer and ultimately a statutory merger to gain control, according to merger arbitrage experts.

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“Rejection does not make the problem disappear,” said Nicolas Marmurek, co-head of special situations at Square Global Markets.

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—With assistance from Kamil Kowalcze.

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