Commerzbank seeks to fend off potential UniCredit takeover, sources say

By John O'Donnell and Tom Sims

FRANKFURT (Reuters) -Commerzbank's management has discussed how to keep the German lender independent, exploring defence strategies to resist a potential bid from UniCredit, a person familiar with the discussions said on Wednesday.

While Commerzbank will engage in discussions with UniCredit in line with its obligation to shareholders, the bank wants to maintain a stand-alone strategy, said two people, who asked for anonymity because the discussions are private.

Commerzbank hastily convened a board meeting after UniCredit CEO Andrea Orcel surprised Berlin by swooping in unannounced to take a 9% stake in the German lender, poising it for a deal that would eclipse Commerzbank.

Resistance by Commerzbank could complicate a bid to buy the bank, which finances many of the medium-sized companies that are the backbone of the German economy. Berlin still owns a 12% stake in the lender after rescuing it in the financial crisis.

Commerzbank declined to comment.

UniCredit earlier on Wednesday said it will seek regulatory approval to increase its holding to more than 9.9%, while CEO Orcel approached Commerzbank about exploring merger talks, one of the people told Reuters.

That blunt approach, however, was unwelcome, the people said. The German bank has also tapped investment bank Goldman Sachs to advise on its defence options, another person familiar with the discussions told Reuters.

The raid on Commerzbank has reignited speculation of consolidation in Europe's fragmented bank sector.

UniCredit's share price has quadrupled since Orcel's arrival as CEO in April 2021, valuing it at 59 billion euros ($65 billion), far bigger than Commerzbank's 15 billion euros.

Germany is likely to hit pause on any further share sales after being taken off-guard, a government source said, adding that the bank and the government needed to assess what is now a new situation.

Trade unionists too, fearing heavy job losses, also oppose a tie-up.

The chairman of the German Verdi labour union, Frank Werneke, called on the government to stop selling any shares to prevent a takeover of the bank.

Commerzbank shares closed up 16.6% at 14.69 euros in Frankfurt, while UniCredit's closed 0.2% higher in Milan.

Orcel's gambit could also pressure other European banks to consider their strategic options, including Deutsche Bank, which declined to comment on Wednesday.

German officials had privately expressed reluctance in the past to let a foreign bank buy Commerzbank amid fears it would create an even stronger domestic competitor for Deutsche Bank.

Orcel previously approached Commerzbank CEO Manfred Knof about a potential deal in early 2022, before the Ukraine war, people with knowledge of the matter have told Reuters.

($1 = 0.9076 euro)

(Reporting by John O'Donnell and Tom Sims; Editing by Elisa Martinuzzi and Jonathan Oatis)