UniCredit CEO Orcel plunges Germany's political elite into turmoil

Andrea Orcel, CEO of UniCredit, has managed to unite the German political landscape against his plans to acquire a stake in Commerzbank. The country's second-largest lender is the ambitious banker's focus, but German politicians have few means to halt this move. Chancellor Olaf Scholz described Orcel's move as a "hostile attack" after UniCredit announced on Monday that it had increased its potential stake in Commerzbank to 21% through derivatives. Friedrich Merz, chairman of the opposition CDU, views a potential takeover as a "disaster for the German banking market," citing the experience with HVB, which saw significant job cuts after its acquisition by UniCredit in 2005. With elections looming in a year, German politicians are concerned about potential job losses among Commerzbank's 40,000 employees and the loss of control over a significant bank important to the country's medium-sized enterprises. Typically, resistance to such an acquisition could manifest in two ways—either by mobilizing shareholders against UniCredit or through legal steps to block or delay the endeavor. However, German government representatives emphasized that banks are regulated by the European Central Bank (ECB) and laws protecting critical infrastructure do not directly apply to the defense of Commerzbank. The ECB has long advocated for more cross-border mergers to strengthen the Eurozone's banking sector. An investor urged Germany to look beyond national interests: "This is the fundamental question for the German government: Which god will it serve? Will it choose socialism or the free market?" The German government, as an anchor investor, still has some leeway, noted Christoph Schalast, M&A attorney and professor at the Frankfurt School of Finance & Management. "I can hardly imagine UniCredit proceeding with a hostile takeover against the will of Commerzbank's board, shareholders, and employees," said Schalast. Commerzbank's supervisory board vehemently opposed a takeover on Tuesday, criticizing Orcel, and preparing for a prolonged battle. The ball is now in the ECB's court, which must review an application from UniCredit seeking approval to increase its stake in Commerzbank. A senior M&A banker remarked that the German government could exert informal pressure on Italy to hinder or stop a deal, but otherwise has little power to halt Orcel. However, Italian Foreign Minister Antonio Tajani praised UniCredit's courage on Monday, emphasizing that the bank was wise to operate within the internal market.