(Bloomberg) -- UniCredit SpA should hold off making a bid for Commerzbank AG until the second half of next year to avoid triggering a mandatory cash offer, according to analysts at Jefferies Financial Group Inc.
German rules would require UniCredit under certain conditions to complement a potential voluntary exchange offer for Commerzbank shares with an alternative cash offer, the analysts wrote in a note on Friday.
If UniCredit wanted to prevent that, it may be able to announce any offer no earlier than the second half of next year, “with a potential integration no earlier than 2026,” depending on how the regulation were to be applied, Jefferies said.
The prospect of a potentially long wait time contrasts with comments from other analysts including at JPMorgan Chase & Co., who have said UniCredit Chief Executive Officer Andrea Orcel should “move sooner rather than later” if he wants to ensure a successful bid. Commerzbank’s leadership has been preparing for the possibility that UniCredit moves forward with a takeover offer soon, Bloomberg News has reported.
Milan-based UniCredit has secured 21% of Commerzbank’s shares, mostly in the form of derivatives. Orcel has said he’s considering an acquisition, a move that’s opposed by the German government, which currently owns 12% in the country’s second-biggest listed lender.
“A voluntary exchange offer must be complemented by an alternative cash offer in case the buyer has concluded cash transactions involving at least 5% of the shares in the six months preceding the offer,” the Jefferies analyst explained the mechanism in the note.
UniCredit in September disclosed that it had raised its stake in Commerzbank via derivatives. “However, the transaction is physically settled after regulatory approvals are received, so the six months timer could start from settlement,” the Jefferies analysts wrote.
The minimum price of an alternative cash offer would be the price paid on the settled transaction, so if UniCredit would have to offer “a share deal more compelling” if it wanted to pay in stock, the analysts said.
Jefferies has recently helped UniCredit hedge the potential downside of its Commerzbank exposure, Bloomberg has reported. Banks’ equities researchers are strictly separated from the staff who would be carrying out such hedging trades.
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