(Bloomberg) -- UniCredit SpA increased its holding in Commerzbank AG to about 28% as Chief Executive Officer Andrea Orcel continues to pursue the lender ahead of German federal elections that may influence his chances of success.
UniCredit has entered into derivatives relating to Commerzbank shares, the Milan-based lender said in a statement on Wednesday. The stake now consists of 9.5% direct ownership and about 18.5% through financial instruments, it said.
The process to get regulatory permission to hold as much as 29.9% in Commerzbank has been “activated,” UniCredit also said. That would allow the bank to convert its derivative holdings into physical shares. German takeover rules require a shareholder to make an acquisition bid if their stake crosses the 30% threshold.
The increased holding in Commerzbank, up from about 21%, indicates that Orcel, 61, hasn’t given up on his ambitions to buy the lender despite a backlash from the current German government. He said he’s got a year to make up his mind whether he wants to pursue a deal. With the German elections, slated for Feb. 23, likely to elevate a new administration to power, Orcel may soon have a fresh opportunity to make his case to Berlin.
Commerzbank’s shares rose as much as 4.3% in early trading in Frankfurt. They’re up about 26% since UniCredit first unveiled a stake in early September.
UniCredit’s position on a potential bid for Commerzbank hasn’t changed, with Orcel waiting for the outcome of German federal elections before taking any decision on the investment, people familiar with the matter said. Orcel has said he’s going to try to convince the German government of the benefits of a deal.
The way how Orcel has amassed the Commerzbank stake has led to frustration within the government, which owns 12% in the lender. The conservative candidate for Federal Chancellor, Friedrich Merz, has also voiced opposition to a potential deal.
The resistance in Berlin isn’t the only hurdle. Orcel last month also cited German takeover rules as another reason to wait as they would require UniCredit to complement a potential voluntary exchange offer for Commerzbank shares with an alternative cash offer if the bid comes less than six months after any cash transactions that UniCredit has done for the German lender’s shares.
The expanded holding also comes while Orcel is angling for an acquisition in his home market by making an unsolicited takeover bid for domestic rival Banco BPM SpA, a move which would create Italy’s biggest lender. Banco BPM is exploring options to fend off the takeover attempt, Bloomberg News has reported.
Orcel’s latest Commerzbank move “reinforces UniCredit’s view that substantial value exists within Commerzbank that needs to be crystallized,” the Italian bank said in the statement on Wednesday. “The position remains at this time solely an investment and does not have any impact on the public exchange offer with Banco BPM.”
UniCredit has been increasing its stake in Commerzbank in steps since first disclosing it in September, with much of that through derivatives such as total return swaps. That has enabled UniCredit to control voting rights in the German lender without having formal permission from the European Central Bank to exceed a 10% holding.
“We have taken note of the announcement but do not comment any further other than by pointing to our strategy that we continue to implement and are in the process of upgrading,” a Commerzbank spokesperson said. “The results of this process will be announced at our capital markets day on Feb 13.”
--With assistance from Nicholas Comfort and Jan-Henrik Förster.
(Updates with context about German takeover laws in eighth paragraph.)
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