Top officials in Berlin were not briefed in advance about an invitation for UniCredit to bid for a German government stake in Commerzbank, according to three people familiar with the events, despite the move opening the door to a full takeover by the Italian lender.
JPMorgan Chase bankers who advised the government on the 4.5 per cent stake sale invited the Milan-based bank to participate, the people said, giving it the impression that Berlin welcomed its interest.
The sale on Tuesday in an after-hours auction enabled UniCredit to jump to a 9 per cent stake without previously disclosing any interest — something that could have pushed up the price.
The sudden move to become Commerzbank’s second-biggest shareholder — behind the government with its remaining 12 per cent — caught the German establishment off-guard, ignited public opposition to the sale of a strategic asset and put Berlin in an awkward position ahead of federal elections next year.
Before this month, Berlin repeatedly signalled to UniCredit and European rivals circling Commerzbank that it was not interested in selling to them.
Instead, it wanted to sell its stake in small portions to financial investors, according to people familiar with the deliberations, but EU bailout rules barred it from discriminating against strategic bidders.
UniCredit did not approach the government about a potential tie-up with Commerzbank between Berlin’s announcement that it would cut its stake and the auction, said people familiar with the matter.
But people familiar with UniCredit’s thinking said it had expressed interest in purchasing shares to representatives of the German government in advance of the auction, and that the size of the stake and lack of special rights attached to it meant the bank was a financial rather than strategic investor.
The Italian bank, headed by experienced dealmaker Andrea Orcel, had by the time of the auction on Tuesday accumulated a 4.5 per cent stake through derivative transactions that fell below the threshold for disclosure.
Senior officials in Berlin were only told late in the process on Tuesday night that UniCredit was bidding and held an existing stake.
Berlin has started a review of the events and who was responsible for the decisions that led to them, people familiar with the move told the Financial Times.
“At the point in time when the bookbuilding was irrevocably started, the finance ministry did not know that UniCredit owned additional shares in Commerzbank,” the ministry told the FT.
On Monday, Matthias Hauer, a head of the opposition CDU/CSU group on the parliamentary finance committee, urged the government “to dispel the suspicion that it has lost control of the sales process”.
“Given the importance of Commerzbank for (Germany’s) financial centre, it is important that strategic interests are taken into account,” Hauer added.
Fabio De Masi, an MEP for new far-left opposition party Bündnis Sahra Wagenknecht, said: “Since the global financial crisis, we have known that there is stupid German money but now we have learnt that there are also stupid German ministries.
“It beggars belief that decision makers in Berlin accidentally kick off a banking merger,” he added.
Germany’s federal finance agency, the body in charge of the sale, learnt about the existing stake shortly before the auction closed, the ministry said. The ministry does not oversee the day-to-day decisions of the Frankfurt-based finance agency.
“In such a non-discriminatory process like an [accelerated bookbuilding], such information cannot have any influence on the allocation of shares,” the ministry added, with stock awarded to the highest bidder.
People familiar with UniCredit’s position said its existing stake had been disclosed early in the process.
“When we bought it, the German government was well aware we had a 4.5 per cent stake. Implicitly, they were at least neutral on us building the stake” to 9 per cent, Orcel told Bloomberg TV on Thursday.
People familiar with Berlin’s view said this was a misreading of its position. “Nobody [in the top echelon of the government] wanted to invite UniCredit,” one of the people said.
People briefed on internal discussions said key government officials were frustrated by the outcome of the sale. “UniCredit deliberately tried to take everyone by surprise, which has gone down as a highly unfriendly behaviour,” said one person familiar with top officials’ views.
UniCredit acquired the government block of shares at a 4.8 per cent premium to Tuesday’s closing price. Commerzbank’s shares have since shot up 24 per cent because UniCredit’s holding is seen as a potential prelude to a bigger deal.
The events triggered doubt about whether UniCredit should be allowed to pursue a full takeover, the person familiar with the officials’ views added.
Policymakers were “annoyed that the move could mean that the highly acrimonious discussions about a Commerzbank takeover will drag well into 2025, a crucial election year”, they said.
One experienced investment banker told the FT it was unusual to allow a strategic investor to join an after-hours block sale of shares.
The person added that an accelerated bookbuild — a standard process used to quickly sell large tranches of stock to financial investors — was “the wrong tool” when buyers had strategic ambitions.
Thomas Schweppe, a former Goldman Sachs M&A banker and founder of Frankfurt-based boutique shareholder advisory firm 7Square, said Berlin “could have realised a much higher premium and proceeds” in a strategic sale.
Even if the government felt obliged to allow all bidders to participate in a “non-discriminatory” process, it could have included terms to prevent any single bidder acquiring all the shares. “Those are typical terms and conditions,” said one person familiar with such sales.
Several bankers familiar with accelerated bookbuilding processes suggested it should have been aborted after UniCredit’s interest as a strategic bidder became clear. People familiar with discussions within the finance agency said this was not considered possible for legal reasons.
Goldman, which organised the auction alongside JPMorgan, had to withdraw midway through the process once UniCredit’s interest became clear, leaving JPMorgan to complete the bookbuild alone.
Goldman is a longtime strategic adviser to Commerzbank and is now advising on its takeover defence. JPMorgan has previously been an adviser to UniCredit.
UniCredit, JPMorgan, Goldman and the federal finance agency declined to comment.